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Good points MTE... in reality, what are the odds that it would expire exactly at $35. Every option method, sans reversals/conversions, will have some mathematical chance of a loss; however, I don't know of another method that allows a credit position or slightly debit position upon entry with...

Point taken faith... However, there are a few ways to manage the IV reduction. I could transact with 30 - 90 day expiration dates or I could choose to liquidate within 12 hours after the earnings report. Hopefully the underlying asset would have made a substantial move within this 12 hour...

The loss in IV cuts both ways. Both the long positions and the short positions would lose IV. Although the reduction in IV would hurt the long positions, it would be offset by the benefit to the short positions that I sold. Walt

USG is due to report on tomorrow @ 11:00 AM Est. The following represents the data as of 4:00 PM 1/28/08: Market price = $33.25 Transactions to structure: Buy 1 call @ 3.70 - $30.00 strike Sell 2 calls @ 1.95 - $32.50 strike Buy 1 call @ 0.80 - $35.00 strike Sell 1 call @ 1.95 -...

Thanks for the repy faith; however, I disagree with your statement. Because of the long positions in the backspreads, it would be quite profitable if it moves higher or lower than the options I sold. That's the purpose of a backspread... to profit because of the underlyer's STRONG movement...

Has anyone considered combining a call backspread and a put backspread with a long butterfly. It would be best to structure these spreads with a net credit and right before earnings reporting. With a net credit from these spreads there's virtually no risk. If the stock doesn't move, then...

Thanks for the nudge robbie380; I have tried this strategy & do intend on continually testing and improving it. Becasue of my desire to improve it, I have chosen to create this thread. An excellent improvent idea posted by chrismontez is to turn the naked call into a synthetic covered call by...

I suppose that's in effect a synthetic CC approach... seems reasonable if it's a stock you believe in... Walt

Thanks scriabinop... hopefully, I not like the Trump casinos, they're taking a hammering right now I understand. Walt

Good point mihalich... as a matter of fact, I've been testing the selling of straddles just in-the-money, with a one month expiration. However, this past month, which expired on the 18th of January, was brutal for me. Many of my straddles lost because I held on too long. Some of them did not...

sorry to hear that tman.... but I believe that writing calls against futures indices or mega cap stocks after an upward spike of 10%+ is the safest way to approach this strategy. Futhermore, I would only double up (martingale) once or twice, depending on my sentiment and other fundamental...

Let's remember the edge that selling a call ATM after a big upswing can provide. The Theta and Vega should both work in my favor. Also, ATM has some cushion built-in, as it is still more expensive for the buyer to exercise an option ATM than to buy the stock in the open market. Walt

I'm really not trying to catch the top, in as much as I'm utilzing the martingale to protect the fact that I probably did not catch the top. After the option doubles in value against me (with 1 contract). Then I would double up (i.e. 2 contracts) with an additional ATM sell. Walt

Hi Atticus, I would structure my transaction differently. I would sell ATM or even just ITM after a big upswing & it appears that the stock or index is overbought. I would seek an IV of at least 45 or so, preferably with a 30 day expiration. The premium in such a scenario as this would...

Good point profitTakgFool... However, if only once since 1998 would we lose, then that helps to validate the potential power of this system. Losing once every seven years is a great win ratio. I'll take that every time. The loss would only set me back the equivalent of only 6 - 8 premiums at...

sorry... I misspelled the term. This the definition of a "red herring"... A red herring is a metaphor for a diversion or distraction from an original objective. Red herring may also refer to:. Kipper, a fish having been dried, ... en.wikipedia.org/wiki/Red_herring - 15k - Cached - Similar pages

I would be more prone to selling a $46 call for $1.50 with a Feb expir. Although it's currently trading at $1.30, I would set my limit order and wait... patience. Walt

I fully expect the index or stock to go higher; however, I don't expect it to go 30% higher in a 30 - 60 day period. Walt

FullyArticulate, You're absolutely correct about MO. However, that's the exception, not the rule. Even with such an occurence as MO, my loss would be managable, even without the martingale infusion. I'm o.k. with a the opton price doubling or even quadroupling against me once in a while...

XOM spot was at $84.58