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Most diagonal spreads go the other way - with the long leg long-term and the short leg short-term. In the traditional diagonal, you would have a limited loss position similiar to a covered call. The long option is paid for, and the losses from the short option are covered by the long option, so...

Do you contend that common shares are not fairly priced? I would say they're even more fairly priced, particularly the ones that trade billions of dollars in volume every day. Everything with a liquid market is fairly priced by definition. That doesn't mean it's impossible to profit from...

Retail investors absolutely have an edge in derivatives. Look at an option chain. There are maybe half a dozen strikes in both puts and calls. The retail investor's edge is that he gets to choose which one to buy or sell. That may sound silly, but it's more or less an enhanced version of the...

If you're into common shares, I would check the CBOE's list of penny-traded optons, they should have much narrower spreads than the nickel-traded ones. Personally, I would happily give up a nickel in bid/ask if it meant playing a stock I felt I could more reliably predict. Get the cake before...

Wow, condescending. How many people do you think are using common shares for their real purpose, which is having a management stake in a business? Options are little insurance policies. The long side is hedging, and the short side is selling a risk he thinks is not likely to occur. Just...

Time value, I said. As in time premium. Not "time". Having time left is the very definition of being assigned early .

If OI goes down by one contract, that could be your contract getting assigned. Early assignment is about time premium, not open interest. Whether an individual exercises his option doesn't depend on how many other people hold positions in that series. You're safe as long as there's time...

Short puts are long delta (make money when stock goes up), short stock is short delta. Each is a hedge against the other. Personally, I find trading shares against options to be a rather crude hedge. I prefer to manage risk by trading options against options, since options are risk management...

I don't really see this as a delta issue. If the stock isn't doing what you expected, or it no longer looks like it will do what you expected, you should close or adjust the position. If you thought your AAPL option was going to expire OTM and you still think it will recover to OTM, hold on...

A low volatility stock shouldn't have short-term options anywher near that expensive. The straddle would in reality be much cheaper to open and would profit much sooner. Depending on the option prices and the size of the expected move, that might be a worthwhile approach. You can cut your...

Premiums on calls will necessarily go down on a big down day, because they lose intrinsic value or get farther from the money. However, the IV of calls will follow the IV of puts. Ignoring carry cost, the call and put of the same strike expiring at the same time will have the same amount of...

That's one type of adjustment. It's equivalent to requiring the delivery of cash, but they'd most likely only reduce the strike if the special dividend were a convenient round number.

If the original poster is correct, a dividend that large would be considered a special dividend, and the option contracts would be adjusted accordingly. Thus, there should be no advantage to exercising the options early at any price because the options will require the delivery of cash in the...

If one is slightly less pedantic, an income strategy generates more consistent gains than a growth strategy. Most people who are looking for income have a certain desired income level, and do not want to assume greater risk in order to generate a higher average/expected reward. In addition, an...

I think there is a difference. When people are looking for an income generating strategy they typically want month-to-month growth with minimal drawdowns, and preferably positive cash flow. Growth strategies tend to be more risk-tolerant and tolerant of short-term drawdowns on the way to...

We passed zen. When? Just now.

Writing a strangle is a directional play. The proper "boast" for that position is "I don't know which way the underlying is going to move, but I hope it doesn't." "Nowhere" is as much a direction as "up" or "down", since your strangle loses money when the stock moves other than in that direction.

You don't. It's the other guy's option, and he will exercise the option in the way that is most profitable to him (not to you). You sold him a right, and now you are at his mercy. In some sense, you already got the dividend when you wrote the option, since the ex-dividend event was taken...

It's generally the long leg of a credit spread. If it expires ITM, I'm in big trouble.

Personally, every time I buy an OTM option I hope it expires worthless.