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That was his point -- the company announces that it will release news after front month expiry but before back month expiry. Back month vol shoots up, and the spread is toast.

No dividend, but I did find a similar thread in which Maverick74 outlined a fairly terrifying event in which back month vol explodes and front month vol remains steady. No thanks! I'm glad I posted. So -- if I think the underlying will move but I can't say which way, what are some options...

I am considering a short calendar spread as an earnings play (buy ATM near-term, sell ATM farther out). The underlying appears to be consolidating and a breakout seems likely. I am never very comfortable trusting the PnL predictions I see on calendars, diagonals, etc. In this case, the...

If I'm not mistaken, the originator of the thread fancies himself as an educator on options. Am I right? How in the world can that be given his views on the Greeks and trading in general? Wow.

Well, I disagree. There are pretty simple long/short timing techniques on say SPY that can be shown to return ~ 12% annualized (before taxes, which tend to be on long term gains). It's not crazy good performance but it beats buy and hold. I assume one can get similar returns on individual...

Understood, oldnemesis. Thanks for the input. I'm curious -- what drives you to go bull call over bull put (debit VS credit), etc.? Is it just whichever prices out a bit better or is there a more fundamental market factor (vol, etc.)?

I never claimed to have invented the idea. That said, I would probably be inclined to go farther OTM on the call and put. And, I'm more interested in "collaring" a portfolio with index ETFs, not collaring the individual stocks. It's overall market risk I'm most worried about.

Is that different than "Option Strategy Risk/Return Ratios"? I have that one.

This would be my angle. Pick a basket of stocks I like and then sell calls to finance puts on something like SPY to hedge downside risk. It appears that the margin costs aren't all that much better than the cost of the puts, though. A more complicated version (Cottle's "slingshot") also buys...

Could anyone point me to studies regarding the use of "zero" cost collars on a portfolio? I'm curious to see how they work in practice. I like the idea of not having to actively trade in and out of the underlying just to avoid major downturns, but the idea of capping monthly upside to (say) 5%...

Buying to close a short call is not a necessarily bullish move. Your profit is capped, so it could just be smart money management. You could still think the trajectory is downward -- the question then becomes do you want to roll to another short call? Maintaining the long call after closing...

I'm not understanding the rationale behind dumping the long position instead of the short position, at least if his outlook remains bullish, so I hope you clarify. Certainly the decision to not buy back the short must depend in part on its current value. If I can realize 80% or more of max...

optionsXpress reduces commission on OTM option buybacks, but it's something like half rate. Can't remember if they do the same for selling options that are nearly worthless.

I don't think the reference to a no-cost collar comes with the assumption that both OTM options have equal delta. As you point out, the put is almost always farther out. As for the original question, isn't Cottle just saying that a collared long stock has the same P/L as a bull spread with...

Oct15 80 delta MSFT calls trade for ~ 6.7X leverage. What's wrong with assessing your budget for the underlying (say 80 shares) and instead purchasing the 80 delta call? The bid/ask is 20 cents out of 500, so it's not horrible, and the time value is about a dollar. What I like about it is...

Very interesting discussion. Would similar modeling risk extend to diagonals or plain calendars? I have experienced more than my share of multiple-expiry trades that don't behave "as expected".

Not a rec per se, but I've been liking ESV for a while now. Bought a few ITM call diagonals Friday, let's see if they're still ITM tomorrow!

Take a bull call debit spread. A very crude approximation of expected profit would be: The probability of each leg finishing in the money is roughly its delta. So, the probability of the trade finishing at max profit is the delta of the short leg. The probability of it finishing at max loss...

My guess is that you aren't seeing all the trades. I'd trust your own account history far more than some chart.

I'm not sure what you're saying. That's a 37 cent debit for starters. Regardless, are you saying the charts never showed the $103 options trading at $2.28, or are you saying that your model said it SHOULD have been worth $2.28? If the former, then I would ask if you put it on as a spread or...