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Due to lack of borrowability/risk, the borrow rate is huge. That creates the disparity in the prices of the puts and calls.

Yes, but you can get screwed overnight by price movement in your newly acquired position in the UL. As an aside, I once had some naked ITM MSO calls with 2 pts of time premium exercised early. Stock cooperated in the AM and I covered the stock and resold the calls. That's a rare event but...

That's a tough way to make money. IV increases for weeks before earnings. If you buy early, you have double sided decay for weeks. The later you buy, the more you pay up (higher IV). This can be overcome the underlying moves significantly pre EA and the increasing delta of one side begins...

Risk of early exercise if option is ITM and time premium gone. Also occcurs if there's a pending dividend and the time premium is less than the dividend (see conversons). If time involved, must factor in carry cost. It's rare but I've had assignments when there was still a lot of time...

Downside risk is closer to 10% at exp, less if drop is sooner. Even less iinitial position was a collar (and short calls can be rolled down to mitigate some risk). Consider cost per day for protection as part of consideration for what strike to buy: Jan 2013 $30 put is $4.25 (99 cts)...

Take a look at conversions. The carry cost is the cost of holding the position and explains why calls are priced higher than puts (same month/strike).

If a short stock position is acceptable, another possibility is selling ITM naked calls to capitalize on loss of intrinsic value. One problem with this is that if the borrow/carry cost is high, the time premium for deep ITM calls is likely to be low and early assignment can be a problem (high...

Re your put protection idea, the last thing to mention for tonight is the possibility of collaring your positions. Sell OTM calls to fund the cost of put protection (reduced cost for ATM closer to no cost for equidistant OTM strike). Since a collar has equivalent R/R to a vertical spread...

Ignoring arb positions, every option position is going to have a downside. There are an endless number of "Yeh But's" for anything you look at. The bottom line is that you should be looking for a risk graph that provides and acceptable amount of both.

It all depends on your trading style (size, frequency, etc). For me, per contract rate is best since that allows scaling in/out without that pesky flat fee per trade (t)humping.

madbrain, In your calculations, you have some errors that you are not accounting for and they are presenting a disjointed picture: 1) Effect of dividends on put premium 2) Carry cost 3) Intrinsic value when comparing puts and calls I'll elaborate later/tomorrow when time permits. In...

There are various ways to achieve that with more moderate risk. 1) Utilities 2) Preferred stocks 3) OTM naked puts (or CC's if you own the UL) on quality stocks with you're willing to own that pay decent dividends 4) More complicated ed option strategies

Do a search on STRANGLE or STRANGLE PROBABILITY on Hoadley's web site. Good chance you'll find something useful there: http://www.hoadley.net/options/options.htm

It's the same formula for both calculations. However, since the formula cannot be factored, Implied volatility is caluclated by iteration (incrementally increasing an input until the answer is obtained). Here's one of many calculators available out there: http://www.ivolatility.com/calc/...

Good one! LMAO

The perfect hedge is a privet

Well, it could have been worse... It could have been me! :)