Cash secured put + call?

[antares66]

Guess you expect a stock to rise over the next weeks, would it be a good strategy to sell a cash secured put to earn premium and to buy a call to participate in the share‘s rising?

 

[OptionsOptionsOptions]

Guess you expect a stock to rise over the next weeks, would it be a good strategy to sell a cash secured put to earn premium and to buy a call to participate in the share‘s rising?

• Just buy the call.
• Too much margin required for the put. And you only collect peanuts, not worth the risk.

 

[jeb9999]

Long a call and short a put at the same strike price is identical to just being long the stock.

I agree with the advice to "Just buy the call."

 

[Jeff82]

Ditto. If you want to capture the price improvement, buying the call gives you gives you a good return for the risk. And as a previous poster has written, you'd be creating a synthetic stock position. It'd be simpler and cheaper to just by the stock.

Put writing (not naked put writing) will bring in good returns as well, but you have to know how to manage the process and the risk.

 

[OptionsOptionsOptions]

Put writing (not naked put writing) will bring in good returns as well, but you have to know how to manage the process and the risk.

Put writing brings in peanuts - no exceptions.

 

[BMK]

you'd be creating a synthetic stock position. It'd be simpler and cheaper to just by the stock.

Margin requirements on a synthetic stock position (long call + short put) may often be lower than buying the stock.

 

[Jeff82]

Margin requirements on a synthetic stock position (long call + short put) may often be lower than buying the stock.

True. The original poster's question was in reference to a cash secured put.

 

[Overnight]

Margin requirements on a synthetic stock position (long call + short put) may often be lower than buying the stock.

But buying the stock has no margin at all. You're in it whole?

 

[Jeff82]

Put writing brings in peanuts - no exceptions.

I don't know about that. I've been selling premium since 1984, and now options trading pays the bills. I understand what you're saying though. The carry on SPY LEAPs is about 650 basis points last time I looked.

 

[JSOP]

Long a call and short a put at the same strike price is identical to just being long the stock.

I agree with the advice to "Just buy the call."

Except you put in only part of the cost and receive $$ from shorting the put for the same payout as longing a stock, from a cash point of view. If the short put is cash secured, then there is no usage of margin.

You just have to be careful "the morning after" whether you have been assigned the stock from the short put or exercised the call to get the stock. From the stock assignment, if there is a huge gap down, you might get a margin call to put in more money as if you had bought the stock. If you have exercised the call and got the stock, you need to make sure you tp'ed the stock at a good price to make it worth it.

If you don't want to be stuck with the stock, make sure you close the option position(s).