Hedge my ITM leap position - need help

seo, or spindr
What about a AAPL (@$199.91) BPS
BTO JAN 190P $530
STO JAN 195P $700

Cr./M $170/$330 (52%)
7 wks.

or
BTO JAN 185P $385
STO JAN 190P $520

Cr./M $135/$365 (37%)
7 wks.

Am I doing this right? It looks interesting.
 
Quote from spindr0:

Compare these two:

Buy 1/11 400c, sell Dec 580c
Buy Jun 550c, sell Dec 580c
-----

Compare these two:

Buy 1/11 400c, sell Dec 590c
Buy Jun 550c, sell Dec 590c
-----

Compare these two:

Buy 1/11 400c, sell Dec 600c
Buy Jun 550c, sell Dec 600c
-----

Or use the Mar instead of Jun
Or use 500c instead of 550c
Whatever

Observe the trade offs b/t premium cost, potential stock appreciation and premium lost in a dive. Use hypothetical prices since you want to see the strategy's possibilities and not be sidetracked by market forces (different IV's, B/A spread, last trade)

There's no right answer... only what risk/reward profile helps you sleep better at night.
More...

spind,this type of diagonals are not really IV sencitive as the OTMcalendars,i was talking about....
this is not really a big concern in your case....the concern is,how u should explain the guy why he made less money,compared to his LEAP,in case that google moves with 30-50 $ to expiration.cause i see that the guy is looking for up trend and wants some protection.........
u are giving him a strong positive theta with low delta,getting even to 0 with the move.......this is a neutral strategy,not a direction strategy......
and where is the hedge,in case google falls to 550?
for the last six months google is going 8-10% up moves between monthly expirations,with 4-5% corrections in the middle .......
there would be a lot of sweating with a neutral position in a high volatile stock as google......
if the guy was using this strategy......i doubt that he would have made half the money,he actually did.....
i guess he was lucky,he didnt find the forum earlier for a...... PROFESSIONAL ADVISE.
 
Quote from traderlux:

seo, or spindr
What about a AAPL (@$199.91) BPS
BTO JAN 190P $530
STO JAN 195P $700

Cr./M $170/$330 (52%)
7 wks.

or
BTO JAN 185P $385
STO JAN 190P $520

Cr./M $135/$365 (37%)
7 wks.

Am I doing this right? It looks interesting.
More...

If you want to create a bullish put debit spread

yes you did it right
 
Quote from acen1975:


if the guy was using this strategy......i doubt that he would have made half the money,he actually did.....
i guess he was lucky,he didnt find the forum earlier for a...... PROFESSIONAL ADVISE.
More...

Hello Acen,

My profits were not based on luck.

I really didn't get any of your strategies
All of them has high break even point with worse protection then my strategies.

No one else in the forums understand it.

also spindr0 strategy doesn't make sense for me.

thanks you . I study now a lot about what not to do
 
Quote from seotrader:

Hello Acen,

My profits were not based on luck.

I really didn't get any of your strategies
All of them has high break even point with worse protection then my strategies.

No one else in the forums understand it.

also spindr0 strategy doesn't make sense for me.

thanks you . I study now a lot about what not to do
More...

didnt say your profit are based on luck...read more carefully.....

OTM cldrs need much more of experience to fully understand them,compared to other strategies.

lets check what happened from the weekend till now-we have already the data back in the forum:
google closed friday @ 580,today it opened around 590....

so let compare the up move and the prises of the strategies at 590:
will take only the up positions:
u have: 1 470 leap -friday was 143.00,today is 149.00
so u made about 600$,which is a little less than 4%.

in my case-590 leap 6850$+5 call cldrs dec/jan 630 @1600$.
total investment-8450$
now-590 leap is 7250(+400$) and the calendars are 2150(+550$)
total in my case-for 950$,which is over 11%.....or for to day my position give 3 time more profit,with a 10$ move in google for 2 trading days.
the down side-if google would have fallen,we lose the same at first,but biger the drop,u start losing more than me......
so-the risk is the same,but the profit potential is rather different.

now lets check spind position-investment 20 000$.......i dont have his positions prizes form friday close,but comparing the deltas,today it would have made between 400-600$,which is 2-3%.......
if google continues to rise spind position will make max a couple thousand,if it rises a lot,even less ....
if it stays around these levels,his position will be the best winner,but the profit is limited to 2000-3000$ to exp...
if there is a big fall in google,his position will lose the most money.

so every position has its advantages and disadvantages......,the thing is to balance the pluses and minuses and the best ratio between them,to make the bet on your predictions.

from the weekend till now,as what happened with google,the reality is:
acen+12%
you+4%
spind+2 to3%.........
thats without the hedge....but if we must put the hedge,all positions needed......
if 2 long puts jan 550 @8.50 for 1700$,they would have lost 590$(30%)
if it is 3 put dec/jan cldrs for 1630$,they cost now 1320$-310$loss (20%)
 
acen,
I wanted to scope out your position so I could try to understand it. Please check for accuracy. (Only wanted to get close on the prices).
As I understand it, this is a suggested strategy position and would need management based on option expiration and underly price movement.

Initial core position GOOG @ $580, Fri 11/27/09
BTO JAN 2011 590C $6850 (ATM LEAP)
STO DEC 630C $90
BTO JAN 630C $430
BUY (5) DEC/JAN 630 CALL SPRD (OTM CLDR SPRD), (Db. @$320), $1600

Hedge:
STO DEC 55OP $200
BTO JAN 550P $720
BUY (3) DEC/JAN 550 PUT SPRD (OTM CLDR SPRD), (Db. @$540), $1630

Total 6850+1600+1630=$10,080

Thanks
 
yeah,i think thats it,but this was just an example how to put a better edge from a different strategy,compared to a ITM leap.
my game on google is diffrent.
so today with about 10-12% profit,this position can be changed-the leap can be closed,and to BUY i more OTM put calendar.
already the uptrend is defended-this 5 OTM calendars have very strong potential,if goog continues to go up.
but u need another hedge.to ballance the position.
the call calendars + the leap made 3 times,the hedge lost.and u have 2 trading days of delta bleed in both calendars.
if google continues to go up,this calendars have potential up to 200-300% gain.....so with every move up,should balance the position with hegde....and if google starts make a correction,u start cashing the hedge.....
it doesnt need to keep the hegde to exp.......if u buy 1 put OTMcldr now,and google make it back to 580,u just cash the profit....if it goes to 570,start cashing one by one the 550 calendars..
u got to move with the underline,so u can profit from both directions,and build on unbuild the sides of the position ,not to lose in case google overshoots the frame of the position.....
example-if google goes to 600-instead of buyng another protection,just close one of the OTM 630 call calendars.
buy mixing of buyng and selling OTM calls /puts cldrs, as the market moves,u cash the gains,and keep the same risk premium....this is much better,than sit and wait to expiration... exposing yourself at the mercy of the market at expiration time.
its a good game,but u have to be at the computer all the time.
and at first u will make a lot of mistakes,but mistakes are the best investment-u learn from them stuff,that sometimes you will never find in books.....
how fast u learn and can you learn from your mistakes-thats the real key for a successful trading "at home" .....
books help to one level...after that....its only you.
 
Quote from plg007:

great work my dear fellow.. you will definitely touch the sky in the future. this is really a fantastic work by the way..
More...
Acenn,

I think you could be a good salesman. As for trading, my inclination is that if I were to assess you based on what I have read is that I would be surprised if you are above the average.

I think your educational background seems to come from an area where talking and arguing is the most important determinant to success. I would not be surprised if you got some real low grades in math/sciences classes. In other words, you may lack rigor but your throat maybe strong because of a lot of talking.
 
Quote from acen1975:

yeah,i think thats it,but this was just an example how to put a better edge from a different strategy,compared to a ITM leap.
my game on google is diffrent.
so today with about 10-12% profit,this position can be changed-the leap can be closed,and to BUY i more OTM put calendar.
already the uptrend is defended-this 5 OTM calendars have very strong potential,if goog continues to go up.
but u need another hedge.to ballance the position.
the call calendars + the leap made 3 times,the hedge lost.and u have 2 trading days of delta bleed in both calendars.
if google continues to go up,this calendars have potential up to 200-300% gain.....so with every move up,should balance the position with hegde....and if google starts make a correction,u start cashing the hedge.....
it doesnt need to keep the hegde to exp.......if u buy 1 put OTMcldr now,and google make it back to 580,u just cash the profit....if it goes to 570,start cashing one by one the 550 calendars..
u got to move with the underline,so u can profit from both directions,and build on unbuild the sides of the position ,not to lose in case google overshoots the frame of the position.....
example-if google goes to 600-instead of buyng another protection,just close one of the OTM 630 call calendars.
buy mixing of buyng and selling OTM calls /puts cldrs, as the market moves,u cash the gains,and keep the same risk premium....this is much better,than sit and wait to expiration... exposing yourself at the mercy of the market at expiration time.
its a good game,but u have to be at the computer all the time.
and at first u will make a lot of mistakes,but mistakes are the best investment-u learn from them stuff,that sometimes you will never find in books.....
how fast u learn and can you learn from your mistakes-thats the real key for a successful trading "at home" .....
books help to one level...after that....its only you.
More...

Hi Acen

Thanks to tradelux and u things are becoming more clear now.

I put the values under TOS risk analyzer and now it start to make a little sense to me! , but I still have some open questions

The breakeven point is 602 ( great!)
If we stay the same we can lose
up to 1532$ at 19/12 expiration

If we go to 550 I'm not sure how much we will lose ,but its up to 3000$ ( yeah better then my )

What bother me is the idea of the leap is that I want to hold it for long ,

I have no problem to roll it up when I profit...

but I can't accept to lose 1532$-3000$ after 1 month if it doesn't move or drop.

I want to understand how exactly you make profits when it stays the same or go down

Thanks
 
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