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Thanks John, I think that I just got it all wrong. It should have
been sell an at the money put and sell the underlying. I want to know
if I am clear about what can go wrong if the price goes up, stays
about the same, or goes down. If the price goes down the the loss on
the option and the gain on the underlying should cancel out. If it
goes up, you maintain the value of the sold put but you lose on the
sell of the underlying. I guess that a stop, would stop the loss on
the underlying but then you would be naked agian.
--- In realtraders@xxxxxxxxxxxxxxx, I4Lothian@xxxx wrote:
> Are you bullish the security? Are you bearish volatility? Those
are the two
> positions that you are taking? If that this the position you want
to be in,
> based on your analysis, then this would be one strategy that would
work if
> what you expect to happen happens. If you are not bearish
volatility, but
> are bullish the stock, then this would not be as good of a good
position.
>
> Of course it is important that you understand what selling options
is all
> about before entering into a trade like this. And even more than
that, the
> easiest to manage position is the simplest. In these times of wild
market
> action and liquidity pockets, it is best to keep your position as
easy to
> manage as possible. That means stay in the most liquid contracts.
Long
> options are better than short options in time of volatility, not
only because
> of the risk, but because of the control.
>
> Keep it simple and keep control of your risk.
>
> Regards,
>
> John J. Lothian
>
> Disclosure: Futures trading involves financial risk, lots of it!
>
>
> In a message dated 3/26/2003 1:12:44 PM Central Standard Time,
> prosper1000@xxxx writes:
>
>
> > Let's say that a security has been going up and it has leveled
off
> > and it has fairly high volatility. So I sell an at the money put,
> > then I turn around and buy the underlying security. You thoughts
> > appreciated.
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