How much do you have to know?
- Thread starter gritsking
- Start date
Garbage in = garbage out, realizing your earlier stupidity and trying to bury it with more nonsense does not make you any less full of shit. Sometime it's better to admit you are wrong and move on than continue to make a complete ass out of yourself.
Same strike same expiration, cc and naked puts have equivalent risk/reward profile. CC requires additional cash to carry the trade so if the riskfree rate is very high it may make a slight difference, and cc is more expensive to execute since you need to pay additional transaction cost to buy the underlying stock.
a 30 sec google helps..
Do you having reading comprehension issues?
I gave you two possibilities. The first one involved a long call. The second one involved a short put. Read the second one again.
With equivalence, anything that you can do with puts, you can do with calls and vice versa. It may not be a better way to do it but it can be done. Perhaps you need a (option) weenie.
You keep saying this, and yet the positions suggested to achieve this supposed equivalence consistently involve psychic future information, fail to capture the behavior of the underlying when there's not a covered call, sell volatility at different times (and thus different prices) than the covered call strategy would, and STILL don't get the dividend right (although with LLY the options come pretty close). Oh, and they also happen to be painfully illiquid when compared to an ATM call.
Apparently equivalent is a pretty loose concept in options land
Quote from The Big D:
You keep saying this, and yet the positions suggested to achieve this supposed equivalence consistently involve psychic future information, fail to capture the behavior of the underlying when there's not a covered call, sell volatility at different times (and thus different prices) than the covered call strategy would, and STILL don't get the dividend right (although with LLY the options come pretty close). Oh, and they also happen to be painfully illiquid when compared to an ATM call.
Apparently equivalent is a pretty loose concept in options land
Ok, Big D, here is the deal (I know I wasn't supposed to come back here, etc.) - I think I know what you are saying, but there is still something you seem to be missing.
Lets looks at 2 different strategies, each one using calls and puts. The first is the simple buy-write or sell put. I will call the Call strategies "A" and the puts "B"
1A - Buy XYZ for $30 - Immediately sell CC for say Jan
1B - Sell XYZ 30 strike put for Jan
I think we can agree these are the same.
Now, what you are saying is this:
2A - Buy XYZ for $30 - hold stock - it goes to $36 - now sell 36 strike CC - stock holds up and you sell it for $36, while collecting dividends and premium as well.
2B - Same exact thing can be done - Buy XYZ for $30 - hold stock - it goes to $36 - NOW, instead of 2A, you sell stock for $36 - sell 36 strike put - get same premium. Stock holds up. Overall, you got $6 gain from stock + dividend + put premium.
So again, 2B is the exact same as 2A, but you never used a call.
Now, if you are saying it is impossible to replicate 2A by just selling a put at that point, ok, but so what? In other words you aren't really comparing a put-selling portfolio to a call write portfolio - you are comparing it to a portfolio where stocks are first held for gains, then calls are sold - again, the same thing could be done with puts - buy the stock - get the gains, sell the stock and sell the put.
For me, I have mostly given up doing CCs or short puts on my own and now I just buy CEFs that do that - and get monthly dividends - I find it easier to be diversivied that way and quite honesly a lot less work searching for the correct stocks/calls/puts whatever.
JJacksET4
So the solution to replicating the underlying with puts is to hold the underlying? Uhh, that's nice
My point all along has been that the underlying is a key part of this strategy and can't just be replaced with a put. Some people are having a hard time grasping that, and I'm having a good time laughing at them.Covered calls have similar risk/reward profile as naked shorting puts. In particular, they both have the exact same "wipeout" profile - if the underlying collapses, you're toast either way.
If you'd be comfortable with that, keep on keepin' on...
If you'd be comfortable with that, keep on keepin' on...
What exactly is this argument about?
To replicate intermittent use of CC, you go long the underlying when you don't want to be covered, you sell the underlying and short the puts when you do.
Same thing, either way, one approach uses calls, the other uses puts.
To replicate intermittent use of CC, you go long the underlying when you don't want to be covered, you sell the underlying and short the puts when you do.
Same thing, either way, one approach uses calls, the other uses puts.