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I don't have the time/software handy to analyze this position in detail,
> From: profitok
> Sent: Monday, March 25, 2002 10:03 PM
long 175 IRIAI total cost $144000 current value $$133000
long 175 QAVPH cost $25625 current value $ 11375
short 175 QQQEJ sold $44875 current profit $16000
have order to buy back to close@ 1.35(qqqej)
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But here are a few general observations. First, a synopsis of the position:
LRIAI (not IRIAI) - Jan 04 35c
QAVPH - Apr 02 34p
QQQEJ - May 02 36c (short)
I don't know when this position was established but using the stats above, the
initial prices were:
Jan 04 35c 8.22 (-)
Apr 02 34p 1.46 (-)
May 02 36c 2.56 (+)
debit 7.12 (-)
current prices (more/less)
Jan 04 35c 6.70 (+)
Apr 02 34p 0.80 (+)
May 02 36c 0.90 (-)
credit 6.60
on the face of things, it looks like this position would currently be a net
loss of -0.52 per position, although the 4/03 post indicated that the Apr 34p
puts were closed at $1.75 and the 36 calls bought back at $0.75, which would've
netted $2.10 for the short call long put combo. This would have offset
the -$1.52 loss so far on the LEAPS, leaving a $0.58 profit overall, if I got
everything right. But, as we can see above, just a few days later this position
has become a -$0.52 loser. If I've got the details wrong, please jump in and
correct the facts.
Regarding the position itself, the long call LEAP, short near term call is
similar in character to a covered call, which would be equivalent to a short
put. This would be offset by the long put at a lower strike, making this
equivalent to a put credit spread. The differing option expirations make the
exact payoff and volatility sensitivity difficult to analyze, so it would help
to run this through a modeling program. One thing I found a little surprising
in the way the position was set up was that the long put options were a nearer
term expiration than the short calls. All things being equal, the theta on this
put would be higher than than that of the short call, meaning this position
would lose time value faster than, say, if the put were longer term than the
call.
Netting it out, maybe a simple put credit spread (or perhaps a put calendar
spread, with the long put being of longer duration) would be simpler to set up,
analyze and manage?
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