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It's hard to know what the OP is talking about. If he's referring to option protected stock then that's synthetic option buying. Which is better, buying options or stop lossing stock? Depends on your timing, selection, money management skill and if the gap hits you.

----------------------------------------------------------------- Quote from spindr0: You buy the highest stirke because the premium is lower. ----------------------------------------------------------------- Check out an option chain. See if you can pull it up. Give it your best shot.

The question posed by konviction was: "How do you choose the right strike price? I focus more on the delta of the option because I want dollar for dollar movement (im not doing anything fancy here, just buying calls or puts as a replacement for stock shares), but when you have 3 or more...

You buy the highest stirke because the premium is lower. That ties up less margin and loses less if an unexpected collapse occurs.

As MTE pointed out, Chucky was not referring to a strangle. If he were, it would be a horrible (losing) choice in the OP's context of a short term 1-2 pt move up or down.

If it has a delta of 1.0 and makes 1:1 to the upside then it's going to lose 1:1 to the downside, especially for the criteria of AMZN moving 1-2 pts up or down in the next few days as posed by the OP. The highest strike AMZN call with a delta of 1.0 will lose maybe $9.75 for the first 10 pts...

If your timing is any good, why waste your time with covered options? If it's a top, sell the stock that you own (or short it). Conversely for the bottom. If you're going to do covered positions, base them on the stock's behavior not the level of premium.

Unless it's an OTM 5 cent option :D

I'm proficient with a only a smattering of IB's technology so this is just a guess. If you are using your own pricing assumptions in their Option Modeler to determine option fair market value, you'll get different numbers. The best thing to do is to go to their web site and search on...

In a strangle, initially, what one side makes, the other side loses. Add time decay on two sides and you have a position that makes money only if the underlying moves. The longer it takes to move, the larger the move that you need to break even. AFAIK, optimizing delta/gamma isn't going to...

If your buy order is at or above the current market asked price, you get a fill and you have removed liquidity. If your buy price is below the current asked price, you have added liquidity.

What would you call a credit received for adding liquidity? A rip on? ECN's incentivize adding liquidity because increased liquidity means increased volume and that results in increased profits for them.

Maybe even worse than 1.5 or 2 given so much time left. But that's a moot (even mute) point since it dropped. Nice trade!

-------------------------------------------------- Quote from spindr0: ....free money parade! -------------------------------------------------- That's a nice way to descibe that tin cup with monkey act. Nice look! :p

Sounds like you're on an "unbundled" commission structure. Check your "pricing structre" page for your elected choice, Also, do a search at the IB web page on unbundled/bundled and see if that explains it.

Don't rain on my free money parade! :mad:

A nap can be really refreshing. So get up 3 hours earlier than usual and take a 2 hour nap before trading! :)

Is Trading getting Harder? Not at all. It's getting easier all the time. Making money is the hard part! :eek:

Question for RBS: How do you spell S-O-L-V-E-N-C-Y ?