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And that's the whole point. Since the carry cost is priced into the options, if you ignore the carry cost of the stock, then the CC looks more attractive than the NP.

Check out pages 21-23 of the CBOE margin manual for the SAMPLE CALCULATIONS FOR OPTIONS. That will give you a better chance of figuring out the margin than moi :) http://www.cboe.com/tradtool/marginmanual2000.pdf

Dividends and carry cost are priced into the options. Your April cost basis will be $32.00 via the covered call. The cost basis of the April naked put shares will be $32.15 The naked put writer collects 1% on his $3,270 for 6 months. That's about $15 so it's a wash. If anything, the...

The margin is going to increase. The appropriate paragraph is: >> For a listed, uncovered option on a leveraged ETF, the formula above will continue to apply; however, the percentages of the underlying ETFmarket value will be determined using the same methodology as the underlying ETF. Thus...

I took your statement out of context? Your exact statements were: 1) No, selling vertical spreads is not a viable way to produce monthly income of any amount, much less 5-10%. 2) Bottom line is vertical spreads are no way to produce income. NOT VIABLE in ANY AMOUNT and NO WAY mean just...

There are a lot of things that you can do but first you have to decide whether you're an investor (looking for 15), mildly bullish (looking for 8-9 in the short run), looking for ycurrent yield, looking to acquire more shares at lower prices, or looking to conserve capital.

Excellent explanation on the mechanics of delta neutral trading. But I have a problem with any kind of Max Pain Theory. If you look each month at the distribution of expiration prices of nearly 3,000 optionable stocks, they lie across the spectrum of price. They don't cluster near strikes...

You've stated that "Selling vertical spreads is not a viable way to produce monthly income of any amount" and "Vertical spreads are no way to produce income." Yet covered calls, writing puts and credit collars are. Interesting premise. Now what happens if someone substitutes a call for the...

As others have pointed out, specific investment advice may come back to haunt you. There's nothing wrong with suggesting possible vehicles for investing but it's his responsibility to understand them, decide which ones are applicable and pull the trigger. You indicated that your friend...

If the next stop up is > 15 then you shouldn't be monkeying around with options that cap your upside.

Is there a source (free) for historical option data 3, 6 or more months expired?

Is doing an ATM spread for a chance to gain $2.50 against the possibility of losing $2.50 a better choice? Right from the get go you make or lose 50 delta on the underlying. Or how about the possibility of an ITM spread of making $4.50 versus losing only 50 cents if wrong? One small...

If an option has any combination of intrinsic and/or time premium, the obvious thing to do is to just sell it to close. The only reason to exercise a long contract would be to obtain a position in the underlying (long or short). If you're on the short side, pin risk should always be a concern.

1) The odds may seem with you but they are not. Say you can improve that win/loss ratio from 75/25 to 90/10 using your technical analysis. This would be extremely difficult but lets say hypothetically you could do it. Say you would still win the $.45 90% of the time and lose $4.50 10% of the...

There's no way to know what the opening IV will be. Some collapse quickly, others take a couple of hours to get there. And there's always the morning news wild card. AM numbers are just a guess.

1) Are selling vertical spreads a viable way to produce monthly income over the long term? I generally look for 8-10% return a month but am happy with anything over 5%. Basically, I am selling time decay. I have been successful but I want to ensure it’s not a fluke. Your success will...

Once upon a time, I used to write naked puts on a lot of stocks that I "thought" that I wouldn't mind owning. And more often than not, on expiration Friday, I'd roll the ones that were near or out of the money. The routine was no different on Friday 10/16/87. In fact, they looked quite good...

If you have a modeling program that can plot multiple time graphs prior to expiration, you can see the R/R via pretty pictures. Set up an equi-dollar spread. For example, if the ITM is $10, short 4 $2.50 OTM's against one of them (or vice versa). The graphs will show at what prices and time...

Yep, it does sound that way and they have been cracking down on that practice.

Stops are not a good idea because as Mark W pointed out, bids can widen, expand wildly,and fill you quickly and poorly. It doesn't happen often but it does. My suggestion would be the the same as Mark-911. Buy some wing puts and calls that are much much wider than a typical IC/IB but buying...