covered call credit spread? GE

[spindr0]

prc117f,

I'm not trying to bust your chops. Are you aware of what a conversion is?

I'm also not playing the hindsight game about what you should have done on the way down. I'm just trying to bring add'l info to your attention for your consideration, should you be in this situation again.

Another possibility for hedging a stock position is a collar where you sell the call at a higher strike and use the proceeds to buy puts at a lower strike. It puts a floor under you, relatively close to the stock's price and gives you some upside room to profit if the underlying reverses. In your conversion, you have that floor but you have no upside. Essentially, you've locked in the current price.

 

[Subdude]

Quote from spindr0:

You're like the Pillsbury Dough Boy, subdude. Squeeze here and out pops an answer over there which has nothing to do with the discussion.

I get it. Your ideas are good (to you) even if they have nothing to do with what's asked or are even relevant or practical given the OP's situation. LOL...

So what you're saying is - even though the OP could have saved a few thousand dollars by taking my advice, it was irrelevant to his situation, nor helpful in any way? Wow, some people just never give credit when due no matter how obvious it is. But hey - at least you schooled him on what a conversion is and when not to use one.

 

[dagnyt]

Quote from Subdude:

even though the OP could have saved a few thousand dollars by taking my advice, it was irrelevant to his situation

Of course i was irrelevant.

He did NOT WANT to sell his shares. He stated that clearly.

Thus, your suggestion that he do so was completely irrelevant.

Mark

 

[Subdude]

Quote from dagnyt:

Of course i was irrelevant.

He did NOT WANT to sell his shares. He stated that clearly.

Thus, your suggestion that he do so was completely irrelevant.

Mark

OMG, are you guys serious? Do you always take every question literally? Can you possibly fathom the whole reason for him playing with credit spreads is mitigating the huge loss in the underlying? I merely suggested an alternative approach to dealing with the same issue - does this make my suggestion irrelevant?

Forget it, I'm unsubscribing from this thread.

 

[prc117f]

Quote from spindr0:

prc117f,

I'm not trying to bust your chops. Are you aware of what a conversion is?

I'm also not playing the hindsight game about what you should have done on the way down. I'm just trying to bring add'l info to your attention for your consideration, should you be in this situation again.

Another possibility for hedging a stock position is a collar where you sell the call at a higher strike and use the proceeds to buy puts at a lower strike. It puts a floor under you, relatively close to the stock's price and gives you some upside room to profit if the underlying reverses. In your conversion, you have that floor but you have no upside. Essentially, you've locked in the current price.

I am still learning, but not familiar with that term.

I created the position with the thought GE will go further down due to the bearish sentiment on GE I can close out my call position and keep the put in place then sell the long put.

Both the long Put and the short call are profitable. I guess it is like synthetically shorting against the box? Since I am betting against 7.50 in the near term.

If lets say GE drops to 5 I have a put with pretty good intrinsic value, and a call with no intrinsic value and little time value I can close.

Right now my call has no intrinsic value only time value

but the long put has intrinsic+time value

The Call was worth more than the put option so it was nice to be able to use the premium from the call to buy the put and have cash left over.

Oh and yes pin risk obviously on the call side.

Anyhow all this is an interesting learning experience. I am reading a few books on options.

 

[spindr0]

Quote from Subdude:

And the best advice award in this thread goes to... (drum roll) ME! I know you have a cash account, prc, but man - how much of this brutality can you possibly take?

Another internet stock advisor is born!

 

[spindr0]

I created the position with the thought GE will go further down due to the bearish sentiment on GE I can close out my call position and keep the put in place then sell the long put. Both the long Put and the short call are profitable. I guess it is like synthetically shorting against the box? Since I am betting against 7.50 in the near term.

That's pretty much the gist of it. Whatever the stock makes, the call loses and whatever the put makes, the stock loses. The conversion locks in the P&L at the time of execution and there's no further potential for gain (or loss) unless you remove a leg and subsequent events go in your direction.

Anyhow all this is an interesting learning experience. I am reading a few books on options.

That's exactly what you you need to do. It's like learning a foreign language and ya hafta be able to think it as well as speak it

 

[spindr0]

Quote from Subdude:

So what you're saying is - even though the OP could have saved a few thousand dollars by taking my advice, it was irrelevant to his situation, nor helpful in any way? Wow, some people just never give credit when due no matter how obvious it is. But hey - at least you schooled him on what a conversion is and when not to use one.

No. What I've been saying is that your advising someone that buying Mar 5 puts on $8 stock bot at $15 is a good way to "hedge himself out of it" was lousy advice.

In return we've gotten a wild goose chase about making $150 on Mar 2.5 puts, self proclaimed clairvoyance about selling the stock, criticism of the OP for making a bad trade, explanations of IB's commissions, pleas for approval for recommending the OP sell the stock, suggestions for BAC stock at $20, ad nauseum. And you wonder why I think you're the Pillsbury Dough Boy? (squeeze here, something pops out there)

 

[Subdude]

Quote from spindr0:

No. What I've been saying is that your advising someone that buying Mar 5 puts on $8 stock bot at $15 is a good way to "hedge himself out of it" was lousy advice.

In return we've gotten a wild goose chase about making $150 on Mar 2.5 puts, self proclaimed clairvoyance about selling the stock, criticism of the OP for making a bad trade, explanations of IB's commissions, pleas for approval for recommending the OP sell the stock, suggestions for BAC stock at $20, ad nauseum. And you wonder why I think you're the Pillsbury Dough Boy? (squeeze here, something pops out there)

LOL... now I'm being accused of claiming clairvoyance - this is just too good. GE dipped below $6 today, and I was actually pleading with you, spindr0, to approve of my advice??? Oh, please pat me on the back, master - I beg of you!

Oh no, OP didn't make a bad trade - he only lost about 2/3 of equity in the position! Comments like yours make my day - it's like watching Chris Rock on stage.

 

[KINGOFSHORTS]

Wow looks like he took the right opinion there. That 7.50 put is worth 1.53

No way in hell GE is going to be 7.50 on expiration day.