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If you can get those prices I don't see anything
wrong with that spread. A simple outside combination with 1 point of risk
for 1.5 in reward. You have a basic gamma neutral spread.
Now comes the question. Do you trade it or
hold it? I assume that the targets for movement of the underlying, up and
down, fall within your profit parameters if it is a hold situation.
Will the volatility of the underlying allow it to
stay within that 1.5 point range on either side of the current price or
will adjustments be necessary. I know you have a plan, but those that are
looking at this and saying, easy money, won't understand how to adjust the
spread if price starts to move in either direction. There are
dozens of solutions to this problem. How would you handle
that?
Ira.
----- Original Message -----
Sent: Monday, August 29, 2005 9:07
AM
Subject: [RT] option spread
whats wrong with this ?
stock at 16.45
sell sep 17.5 calls at 1.85 10
buy sep 20 at 1.15 10
sell sep 15 puts at 1.6 10
contracts
buy sep 12.5 at
.8 10
contracts
Ben
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