Conversion strategy

BKR88 said:
You'd have a guaranteed profit of ~$270 (trade) + $129 (div.) = $399
399/2,950 = .135 = 13.5% in ~8 months if margin req. is $2,950.
***Based upon 100 shares +1P and -1C.
***Early exercise is a risk if price increases too much but wouldn't be a factor for some time.
More...
Where does 270 dollar come from? Jan call and put difference is not 2.7.
 
trend2009 said:
Where does 270 dollar come from? Jan call and put difference is not 2.7.
More...

You have 100 shares of the stock/etf along with the Call & Put.
2 examples: (QQQ @ 293.48)

1-Price closes @ 300
100 Shares ... called @ 295 = 295-293.48 = 1.52 x 100 = $152 profit
Short 295 C @ 28.68 ... = $2,868 profit
Long 295 P @ 27.50 ... expires worthless = $2,750 loss
152+2,868-2,750 = $270 profit

2-Price closes @ 250
100 Shares ... 293.48-250 = 43.48 x 100 = $4,348 loss
Short 295 C @ 28.68 ... expires worthless = $2,868 profit
Long 295 P @ 27.50 ... 295-250 = 45-27.50 = 17.50 = $1,750 profit
(4,348) + 2,868 + 1,750 = $270 profit
 
You must log in or register to reply here.
Back
Top