Beating the Prime

[MYDemaray]

Metooxx,

It's funny you mentioned that strategy, I was just wondering if someone could profitably do that last week.

What happens if/when you are called out of the position. Do you just liquidate your put at market and roll up? Or, do you have a price point at which you assume you will be called out (assuming underlying is above srike of the sold call), and then purchase additional underlying shares in case call is excercised?

I'm interested in hearing more...thanks.

 

[AAAintheBeltway]

Hey Metooxx,

Maybe you could call this strategy the Dog Collars of the Dow.

 

[Trajan]

Quote from AAAintheBeltway:

metoxx,

Is that one of the strategies your group runs? I would think in this market, with so many people having been burned, that there would be significant demand for a hedge fund product offering mid-to high single digit returns with very low risk.

You are talking about some sort of structured product. They don't market those through retail channels in the U.S. very much.

 

[Trajan]

I'm not sure what Metooxx is refering to, the conversion, the collar or some sort of front spread. A collar usually implies a 1 to 1 ratio, which would make it the same as a vertical call spread. The third is what my first trading manager told me to do, "buy puts, buy stock, sell calls." Buy otm puts, buy stock, sell otm calls, this would be done in a ratio so that the greeks are flat. Pretty simple. Then trade against the position to keep the greeks flat and for profit.

 

[metooxx]

Quote from Walther:


What would be ( if someone would trade it correctly ) risk and reward for this kind of trade ? What is a profit on amount involved for this kind of trade ? If I sell Bond call or put, my safety feature is to go for no more then 10% (per trade) of a full margin required for futures contract. Do you use any criteria like that ?
Thanks,
Walter

1 to 5% per month on a diversified prtfolio of equities.

Never tried it on bonds.

Never tried it on futures.

Scan for 5 to 10% monthly yield on the short call less the long put cost.

 

[metooxx]

Quote from EliteThink:

This would have to be a play off of option pricing as there theoretically is no risk and no profit in being long the underlying and short a synthetic at break even on the same issue with strikes at the place of underlying entry.

Works off of the disparity in a rich short option against a cheap long option; i.e. long stock, short ITM or ATM call, long OTM put or short stock, short ITM or ATM put, long OTM call.

 

[metooxx]

Quote from EliteThink:

This would have to be a play off of option pricing as there theoretically is no risk and no profit in being long the underlying and short a synthetic at break even on the same issue with strikes at the place of underlying entry.

Not done at breakeven and strikes are not the same.

 

[metooxx]

Quote from MYDemaray:

Metooxx,

It's funny you mentioned that strategy, I was just wondering if someone could profitably do that last week.

What happens if/when you are called out of the position. Do you just liquidate your put at market and roll up? Or, do you have a price point at which you assume you will be called out (assuming underlying is above srike of the sold call), and then purchase additional underlying shares in case call is excercised?

I'm interested in hearing more...thanks.

You want to be assigned; liquidate the long option and move on...

Don't understand the last part?

 

[metooxx]

Quote from AAAintheBeltway:

Hey Metooxx,

Maybe you could call this strategy the Dog Collars of the Dow.

You can call it anything you like; as long as it makes money ...

 

[metooxx]

Quote from Trajan:



You are talking about some sort of structured product. They don't market those through retail channels in the U.S. very much.

Yes and yes.

But I thought we were talking about someone doing it themselves.

Hard part is the cost of data and scanning ...