Another fantasy filled steaming load of gibbershit from a self proclaimed ET expert. Your valuation of the calendar is way off and at 550, you will have serious losses. Anyone stupid enough to take your advice deserves the consequences!
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Hedge my ITM leap position - need help
- Thread starter seotrader
- Start date
Quote from TheoHornsby:
Your valuation of the calendar is way off and at 550, you will have serious losses.
I have to agree on this one with TheoHornsby
it just doesn't make sense.
I put those position under risk analyzer
1 LONG CALL JAN11 590 CALL
5 LONG CALL JAN10 630 CALL
5 SHORT CALL DEC09 630 CALL
- break even point 675 !
- If we stay at 580 - 7000$ loss
- If we go to 540 - 8200$ loss
If we add the 2 JAN10 550 long puts
- break even point 696
- If we stay at 580 - 8447$ loss
- If we go to 540 - 8270$ - loss
-----------------------------------------------
As the creator of this thread I got to this conclusion ( if someone has a better solution, please let me know) - I hope to find something better , but I didn't.
This is my goal:
I want to hold the leap as a replacer of stock and to sell covered calls on monthly base - the short covered calls need to be max 1 month to expiration with delta of 0.2-0.25
I want to hold the leap until JAN11 expiration.
I want to protect myself in case of a big drop, I want to have the minimal possible loss in case my stock doesn't move upward like I wanted.
This is the lowest risk solution I found:
The best thing is to buy the JAN11 LEAP ( or JAN12 , I use JAN11 ) as much deep in the money as possible with high delta.
That the time value will be less then 6% of google current price - otherwise is better to buy the stock on margin and not to hold a leap.
For example the JAN11 390 call:
- has time value of 18.84 * 100 = 1884$ which is 3.2% of google price.
-it also has a delta of 0.89,
so its better then to buy the 390 jan 11 leap, then to buy the stock in margin
I would also add this protection:
buy the 580 jan11 put
sell the 500 jan11 put
My total positions (390 long jan11 call , 500 short jan11 put, 580 long jan11 put )
Will have ( lets ignore for the moment the short monthly covered calls)
- break even point is less then 10% of the current price ( less when we sell monthly covered calls)
- the max loss is up to 6000$ in case goog will stay between 500-580
- because we sell covered calls and goog stay between 500-580 I expect the max loss to be between 0-2000$
- in case the stock drop below 500 we can close the position or roll the jan11 short put down
>> Another fantasy filled steaming load of gibbershit from a self proclaimed ET expert? <<Quote from TheoHornsby:
Another fantasy filled steaming load of gibbershit from a self proclaimed ET expert. Your valuation of the calendar is way off and at 550, you will have serious losses. Anyone stupid enough to take your advice deserves the consequences!
ROFLMAO
When I read that line about being profitable on a drop to 550, I said to myself, well, that's risk free trading!
Quote from seotrader:
I want to hold the leap as a replacer of stock and to sell covered calls on monthly base - the short covered calls need to be max 1 month to expiration with delta of 0.2-0.25
Risking $208 to make $5 (selling OTM .25 delta call) is not a good starting point.
I want to protect myself in case of a big drop, I want to have the minimal possible loss in case my stock doesn't move upward like I wanted.
buy the 580 jan11 put
sell the 500 jan11 put
My total positions (390 long jan11 call , 500 short jan11 put, 580 long jan11 put )
- the max loss is up to 6000$ in case goog will stay between 500-580
$6,000 loss is hardly a "minimal possible loss". And the put spread will not do a good job of protecting against loss on your 390c
- because we sell covered calls and goog stay between 500-580 I expect the max loss to be between 0-2000$
Which maximum loss is it b/t 500 and 580? $6,000 or 0-2000$ ? My nickel is on the $6,000
- in case the stock drop below 500 we can close the position or roll the jan11 short put down
Rolling a put down to hedge a position losing 100+ delta (the short put and the long call) is a losing proposition
Quote from TheoHornsby:
Another fantasy filled steaming load of gibbershit from a self proclaimed ET expert. Your valuation of the calendar is way off and at 550, you will have serious losses. Anyone stupid enough to take your advice deserves the consequences!
hey genius ,the purpose of this is to hedge against temprorary corection...the hedge is secondary consern,the primary is for up trend........
if it continues to go up,u are left with a 30% cheaper hedge-u have 3 puts left form the cldr,againt 2 puts,if naked....
if google falls to 570 at exp,the calendars will make u money,the2 neked puts will bleed at your delta will decay-u will make no money....
if google falls to 560,your calendars will make about 100%,may be more....the puts about 20%.......
if it falls to 550.....calendars will make u about 3times more,than the nakeds.
ofcourse,if google hits 550 ,u just close the cldrs.......u will still make money on them........
ofcourse,if u expect google to bancrupt within 3 weeks,than buy december puts and nothing else......
but here we are not talking of a crush of this stock....we are talking for up to 5% correction WITHIN 3 WEEKS....
and is just an example....if u thing that within 3 weeks it will go to 500,its still better to use calendars,than naked puts......u just hit 500 strike......if u get it .will might make over a 1000%,considering the delta,the decay of the shorts, and the spike in the IV...
and u dont have to be a rocker scientist to consider closing your calendars,if google goes to 550 before exp.......u will still make over 100% within the 1 week,within the second even more.......
Quote from spindr0:
>> Another fantasy filled steaming load of gibbershit from a self proclaimed ET expert? <<
ROFLMAO
When I read that line about being profitable on a drop to 550, I said to myself, well, that's risk free trading!
well,it might be,if u know how to use option calculators........
i even give u a hint:
this friday,with the drop of SPX of 2 %,the VIX rose WITH 20%........
the end of last month,when SPX fell with 5%,VIX rose with 55%......
now,when u calculate the position,not a bad idea to consider to pick up the IV in google,to see what may happen.......
or it doesnt matter????
u are gonna be like the other forum clowns,that think that drop in equity unerline doesnt go with spike in IV?
it was a moron suggestion....
i thought that even a trader with a 3 month expierence MUST have noticed that,but here are "traders" with over thousand postings that find that moronic.........
Acen writes:
"if google falls to around 550,my position will be a winner-the gamma of the puts will boost my negative deltas more,than i will lose from the ATM leap on 590+ the loses from the calendar."
Bben asks for details:
"Could you please list for us, line by line, the entire position you suggested below with whatever strikes, expiries and prices you would want--including the hedge part. "
Theo posts that Acen's statement is incorrect:
"Your valuation of the calendar is way off and at 550, you will have serious losses. "
Seo agrees with Theo:
"I have to agree on this one with TheoHornsby.
it just doesn't make sense.
I put those position under risk analyzer
- break even point 696
- If we stay at 580 - 8447$ loss
- If we go to 540 - 8270$ - loss"
So where are the details of the position that Bben requested? Do you see any line by line itemized positions? Any strikes with prices? Any projected December valuations of the individual legs to support his claim that the position will MAKE money if GOOG is at 550 at Dec expiration? Nahhhh. To quote Theo, all you get in return is more "gibbershit" from Acen:
the purpose of this is to hedge against temprorary corection...
the hedge is secondary consern,the primary is for up trend........
if it continues to go up,u are left with a 30% cheaper hedge-u have 3 puts left form the cldr,againt 2 puts,if naked....
if google falls to 570 at exp,the calendars will make u money, the2 neked puts will bleed at your delta will decay-u will make no money....
if google falls to 560,your calendars will make about 100%,may be more....the puts about 20%.......
if it falls to 550.....calendars will make u about 3times more,than the nakeds.
of course,if google hits 550 ,u just close the cldrs.......u will still make money on them........
ofcourse,if u expect google to bancrupt within 3 weeks,than buy december puts and nothing else......
but here we are not talking of a crush of this stock....we are talking for up to 5% correction WITHIN 3 WEEKS....
and is just an example....if u thing that within 3 weeks it wil go to 500,its still better to use calendars,than naked puts......u just hit 500 strike......if u get it .will might make over a 1000%,considering the delta,the decay of the shorts, and the spike in the IV...
and u dont have to be a rocker scientist to consider closing your calendars,if google goes to 550 before exp.......u will still make over 100% within the 1 week,within the second even more.......
"if google falls to around 550,my position will be a winner-the gamma of the puts will boost my negative deltas more,than i will lose from the ATM leap on 590+ the loses from the calendar."
Bben asks for details:
"Could you please list for us, line by line, the entire position you suggested below with whatever strikes, expiries and prices you would want--including the hedge part. "
Theo posts that Acen's statement is incorrect:
"Your valuation of the calendar is way off and at 550, you will have serious losses. "
Seo agrees with Theo:
"I have to agree on this one with TheoHornsby.
it just doesn't make sense.
I put those position under risk analyzer
- break even point 696
- If we stay at 580 - 8447$ loss
- If we go to 540 - 8270$ - loss"
So where are the details of the position that Bben requested? Do you see any line by line itemized positions? Any strikes with prices? Any projected December valuations of the individual legs to support his claim that the position will MAKE money if GOOG is at 550 at Dec expiration? Nahhhh. To quote Theo, all you get in return is more "gibbershit" from Acen:
the purpose of this is to hedge against temprorary corection...
the hedge is secondary consern,the primary is for up trend........
if it continues to go up,u are left with a 30% cheaper hedge-u have 3 puts left form the cldr,againt 2 puts,if naked....
if google falls to 570 at exp,the calendars will make u money, the2 neked puts will bleed at your delta will decay-u will make no money....
if google falls to 560,your calendars will make about 100%,may be more....the puts about 20%.......
if it falls to 550.....calendars will make u about 3times more,than the nakeds.
of course,if google hits 550 ,u just close the cldrs.......u will still make money on them........
ofcourse,if u expect google to bancrupt within 3 weeks,than buy december puts and nothing else......
but here we are not talking of a crush of this stock....we are talking for up to 5% correction WITHIN 3 WEEKS....
and is just an example....if u thing that within 3 weeks it wil go to 500,its still better to use calendars,than naked puts......u just hit 500 strike......if u get it .will might make over a 1000%,considering the delta,the decay of the shorts, and the spike in the IV...
and u dont have to be a rocker scientist to consider closing your calendars,if google goes to 550 before exp.......u will still make over 100% within the 1 week,within the second even more.......
A lot of people here seek attention and approval. They make all kinds of grandiose statements and when called on them, they obfuscate - all kinds of unrelated misdirecting details come flying back at you.Quote from Bben1006:
Acen, Could you please list for us, line by line, the entire position you suggested below with whatever strikes, expiries and prices you would want--including the hedge part. This would be very helpful. Also, the OP mentioned that he/she found some errors in the analyze tab of ToS--do you know the details?
I'm going to tell you what you already know. Everyone wants the perfect option position that has a high potential for gain and a low potential for risk. They don't exist and when you read about them here, you had better do some serious work with an option calculator/risk graph before you believe it.
Quote from seotrader:
For me doing CC every month and get 2.5% monthly is an excellent starting point
I think that buying a deep ITM call LEAP for over $200 and selling monthly OTM calls for $5 or so yields a lousy risk/reward ratio. I think you can get a much better risk/reward in other strategies. If you think it's an excellent starting point then we agree to disagree.
Regarding to the rest of your claims, please use risk analyzer like in TOS - I'm not inventing anything.
I never claimed that you were inventing anything. I just pointed out that in one sentence you stated that tthe maximum risk b/t 500 and 580 is $6,000 and in the next sentence you stated that it's 0-2000$. I don't need to use a risk analyzer to figure out that one of them is incorrect.