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- Or, you could buy a put, buy the stock and sell an OTM call. But, the numbers won't add up for a retail trader. And, the time premium for puts will increase as the underlying approaches ex-dividend. What you've suggested is a long stock collar and I don't see that as having any relevance to...

It has been my understanding that: - If there is a pending dividend and the time premium of an ITM put is less than the dividend then there's an arbitrage available. IOW, buy stock, buy put, exercise after ex-div and collect the difference between the dividend and the time premium paid. -...

A long synthetic stock position and a bullish vertical have very different R/R spectrums. The bang for the buck depends on the size and direction of the move as well as the time involved. In the case of a long stock collar and a vertical spread (synthetic equivs), I prefer the long stock...

At one point on Friday, the B/A spread was $1.20. I'm not motivated to trade at such prices, particularly when the aggregate position is fairly delta neutral hedged and a move in either direction doesn't slam me.

I think not. Using your formula and using the midpoint of the call, the put would be worth be worth $7.57 (midpoint). And yet the put's quote is $8.40 x $9.00 . Houston, I think that we have a problem. What's missing from your incorrect answer is dividends and carry cost.

I own some ratio put protected stock (more long puts than stock). I want to keep the stock and roll my puts down 5 points, lowering my cost basis. However, the spread on the higher strike put is Holland Tunnel wide. I would like to know: 1) Fair value of the June $45 put? XYZ = $39.15...

Ummm, not really. Per the CBOE: For purchases of puts or calls with more than 9 months until expiration, deposit / maintain 75% of the total cost / option current market value. When time to expiration reaches 9 months, the option no longer has value for margin purposes. Purchases of puts or...

What exactly do you think margin is? It's the SMA in your account from cash or marginable securities. I suggest that you Google "Margin Requirement Credit Spread" and read about it. "Not really" is actually a really. :)

A covered call is synthetically equal to selling a short put. If you sell a cash secured short put after establishing a covered call then you are averaging up or down, depending on the value of each position's the strike price less the premium received. Where this gets a bit convoluted is if...

Ignoring commissions: A long vertical must be paid for. That is the risk. The potential profit is the difference in strikes less the premium paid. If the cost of the spread exceeds half the spread's width then the potential loss exceeds the potential gain.

The margin requirement for a short vertical spread is the difference in strikes less the premium received.

Assuming that: - These are equivalent spreads - The P&L of each spread is similar - There are no dividend compications Then the call spread would be better since the options would expire if the spread succeeded. If still paying commissions, you'd save on that and you'd also avoid closing...

I have an IWM annuity situation that I'd like to hedge. My cost basis is $149 and the IWM's current price is $166. If IWM is above $149 on 1/31/20, I get 8+ pct ($149.01 or higher). This comes with 10% of downside protection so I wouldn't lose a penny unless IWM drops below $134.10. If...

It's a Captain Obvious statement to say that calls will be priced higher because owning the stock has a larger carry cost. What's lacking from your superficial analysis is the dividend which depresses call premium and increases put premium.

If you want full participation in the market, you have to take on the risk. Here are some more conservative strategies with varying degrees of risk: 1) Buy investment grade preferred stocks which currently pay about 5.5% on average. Rising interest rates is the risk. Flip them for cap gains...

I'm not really sure what you're asking or telling me but rather than guessing, here's the summary of the sequence on one position closed: Worthless zero bid on long $62.50 puts expiring Jan 20th. Tried selling them for 1 cent for several days. No takers. Traded out via a calendar: STC 1/20...

I had no success closing my various long, worthless 2020 options yesterday, probably because I was trying to buy low priced inactive options as part of the calendar. Today I used ATM options and got immediate fills, selling my worthless options for one and two cents and then closing the...

Wash sale violations are meaningless if involved positions are closed out by EOY. It's the carryover wash sale violation that you have to be concerned with.

The problem here is that you're throwing a lot of spaghetti against the wall, hoping something will stick, while avoiding the issue. Take commissions into account? Many brokers have eliminated them. Take short stock borrowing costs into account? This is an overnight dividend capture arb...

Different ETF provider? An Ishares S&P 500 ETF is substantially equivalent to the SPY. It has to be a different index in order not to be substantially identical. But this tangent has nothing to do with options. Per the IRS, it's a wash sale violation if you sell a security and you...