Are selling verticals the same risk as covered calls?

rosy2 · Apr 25, 2008

Quote from atticus:

A long fly at ABC and a bull collar/vertical at XY.

i was looking for a butterfly collar. popular strategy in the 70s

atticus · Apr 25, 2008

Quote from rosy2:

i was looking for a butterfly collar. popular strategy in the 70s

If all calls [qty#/strike-alpha]:

1a x (2b) x 1c x 1d x (1e)

Which doesn't reduce classically, so it remains a butterfly + collar.

Maverickz · Apr 25, 2008

I think he was being a smart ass and trying to refer to Brady Bunch apparel.

atticus · Apr 25, 2008

Quote from Maverickz:

I think he was being a smart ass and trying to refer to Brady Bunch apparel.

Whoooosh. NOW I get it.

traderjb · Apr 26, 2008

Quote from atticus:

What options does your friend trade? I'll be happy to cross some trades with him.

He trades verticals on some Dow stocks. Hey gang, thanks for the responses, I'm glad to see that he was off base. It just seemed odd to me to think that the two strategies had the same risk profile.

newguy05 · Apr 26, 2008

Not directed at traderjb, but in general i just dont understand why those kind of questions keep coming up.

Cant all of this just be plugged into a graph, and then adjust 1) days till expiration 2) volatility and/or 3) underlying price And the graph will tell you the exact risk/reward profile for any strategy at any given time ?

am i missing something

Maverickz · Apr 27, 2008

Quote from newguy05:

Not directed at traderjb, but in general i just dont understand why those kind of questions keep coming up.

Cant all of this just be plugged into a graph, and then adjust 1) days till expiration 2) volatility and/or 3) underlying price And the graph will tell you the exact risk/reward profile for any strategy at any given time ?

am i missing something

Unfortunatly not everyone knows about or has access to such graphical tools....even though some are available free of charge.

commiebat · Apr 27, 2008

Quote from newguy05:

Cant all of this just be plugged into a graph, and then adjust 1) days till expiration 2) volatility and/or 3) underlying price And the graph will tell you the exact risk/reward profile for any strategy at any given time ?

A good intuitive understanding of how options w**k is more valuable than all the graphs, charts and software in the world. Why? Because a bad understanding will get you arbing covered calls against vertical spreads.