Buffet sells way out of the money puts

[PoopyDeek]

This dude is SPED.

The difference between a put and a call is shares.

To convert a put to a call you use spot. Each natural position has a synthetic equivalent. A put is a call when spot is used.

Long call = long spot; long put. The long spot+put is the synthetic long call.
Short put = long spot; short call. The covered call is a synthetic short put.

Long XYZ at 100; short 70C at $30.5. Put is valued at $0.5 (absent rates/divs).

Trading the XYZ CC is equivalent to shorting the put at fifty cents.

They are equivalent in all ways other than the forward while holding the position (rho).

 

[lightninboy]

This dude is SPED.

The difference between a put and a call is shares.

To convert a put to a call you use spot. Each natural position has a synthetic equivalent. A put is a call when spot is used.

Long call = long spot; long put. The long spot+put is the synthetic long call.
Short put = long spot; short call. The covered call is a synthetic short put.

Long XYZ at 100; short 70C at $30.5. Put is valued at $0.5 (absent rates/divs).

Trading the XYZ CC is equivalent to shorting the put at fifty cents.

They are equivalent in all ways other than the forward while holding the position (rho).

https://www.theoptionsguide.com/in-the-money-covered-calls.aspx

 

[PoopyDeek]

https://www.theoptionsguide.com/in-the-money-covered-calls.aspx

You're in your mid 50s and you know less than my 12yo?

So what? It's lower risk because it's DITM. It's equivalent it the same-strike short put. Get that through your head.

 

[PoopyDeek]

Numbnut, MSFT is trading 161.6. Here are the mids on the DITM 110 strike.

Buying the shares and selling the call for 52 is equivalent to selling the put at forty cents. It is. The same. Fucking. Thing.

 

[lightninboy]

Selling FOTM puts, selling DITM calls, either way you can make money or get stuck in a bear surge.

 

[PoopyDeek]

Selling FOTM puts, selling DITM calls, either way you can make money or get stuck in a bear surge.

Yeah, forty fucking cents.

 

[.sigma]

would he not wiped out when vix hits 40? wrong he is cash rich

Hes cash rich regardless of any movement of the VIX lol

 

[lightninboy]

I suppose I could try a FOTM naked put like John Greathouse. If I get stuck with stock I can put it on the wheel.

But I did make money on DITM covered calls.

 

[Real Money]

He has shown interest in airline stocks in the past.

I've also heard him say that he is reluctant to buy airlines, even when attractive. I remember him saying something like

"usually when I start looking at airlines......well, I probably shouldn't be looking at airlines."

 

[lightninboy]

Yeah, airlines are some of the choppiest there is. They'd better pay off good.