Does this idea make sense

M

Mdtbyk

Hello
If every time I go long on a underlaying asset and I always cover myself with buying a put does , so could be a day that the underlaying when up 1 % and I want to cash in the profits , so usually I sell the under laying and the option , but could be that the next day I'll also go long and I will need to buy an option again so does it make sense to leave that option for the secnrio I go long again or of the market goes against me the option will get priced better any how ?
#justathiught
 
The answer to that depends on the volatility of the security, the time to expiry, the magnitude of the move, the remaining value in the put, commission structure, liquidity, risk tolerance, trading time frame...

There's no blanket answer to that question, but it certainly works on a case by case basis. That said, it's probably not worth modifying your strategy in the hopes of this situation arising.
 
If you sold the strike immediately below your long strike, you'd recover half the value (roughly) right off. If you went long the next day, you could buy the short back, which would be less cash engagement than re-buying the (still-retained) long strike. If you wished to play in different dimensions (like, time), you could keep the long, and sell the same strike on an earlier expiry, creating a horizontal/calendar. When the nearer-term short expired, you could go long in that underlying again, with no charge for the insurance.
 
tom.. I like the way you put it... "If you like to play in different dimensions..." which is the nice thing about options. How about this?.. instead of paying the option spread everytime you put on a put hedge, think creatively and use the options as the your underlying and use the stock (which has a much tighter spread) as the hedge that you take on/off? you will get margin relief + pay less in the b/a spread.
Example. Let's say you want to occasionally go long stock XYZ and on certain tech setups , lighten up or even reverse..put in place a long call vertical spread and take off/put on shares to get the right delta exposure.

XYZ= $100 buy a 95/100 call spread 2x, your delta ~100 shares of stock . If you want to go long 100 shares - ride the vertical... lighten up? short 50 shares...etc You might even get lucky and get charm working for you as deltas bleed into expiration and xyz settles around 100-- cherry on top!
 
mushinseeker said:
tom.. I like the way you put it... "If you like to play in different dimensions..." which is the nice thing about options. How about this?.. instead of paying the option spread everytime you put on a put hedge, think creatively and use the options as the your underlying and use the stock (which has a much tighter spread) as the hedge that you take on/off? you will get margin relief + pay less in the b/a spread.
Example. Let's say you want to occasionally go long stock XYZ and on certain tech setups , lighten up or even reverse..put in place a long call vertical spread and take off/put on shares to get the right delta exposure.

XYZ= $100 buy a 95/100 call spread 2x, your delta ~100 shares of stock . If you want to go long 100 shares - ride the vertical... lighten up? short 50 shares...etc You might even get lucky and get charm working for you as deltas bleed into expiration and xyz settles around 100-- cherry on top!
More...
This is very complicated for me where can I learn about it more ?
 
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