I am new

[MTE]

Quote from JSHINV:

I don't disagree with your point. That is why I would buy offsetting put(s) when doing a buy write. But, as I say, I have learned there are better alternatives than this. Also, if the stock takes a nosedive, can't you buy back the call at a lower price and then write another call? Yes, I know you can. But, this is a bad strategy also. I understand this too. I have done covered calls and I don't much care for them, pretty much for the reasons you mention.

My primary goal is to learn to recognize when options are undervalued and do something like straddles or some other strategy. I am new, hence the title of my post. I do this part time. In three or four years, I will be proficient or I will be out well before.

I am going to continue to visit this board a lot. Just not post hardly at all. I am new, as is the title of my post. I can learn a lot from reading these posts. But, it will be a while before I have really something to add. I do like the one poster's comments about being creative. That is the point I want to get to.

I will become proficient at this. But, I am smart and successful enough to know, any gain requires work, work and more work.

Fair enough.
Good trading!

 

[JSHINV]

Quote from Johnny Walker:

Did that comment really offend you that much? I think you need to get some balls and some thicker skin.

Naah, I am not bothered all that much. I am just tired. My balls and skin are fine.

 

[MTE]

Quote from JSHINV:

Naah, I am not bothered all that much. I am just tired. My balls and skin are fine.

How about skin on your balls?
jk, sorry, couldn't resist.

 

[JSHINV]

Quote from MTE:

How about skin on your balls?
jk, sorry, couldn't resist.

Never been better.

 

[theta636]

Quote from MTE:

JSHINV,

Sounds like you didn't like daddy'sboy comment about a covered call being the same as a naked put. Well, whether you like it or not this is the case, the two are identical.

So anyone who says he/she doesn't like naked short option positions, but is ok with covered calls is fooling him/herself.

Synthetic equivalents are identical?? I agree that on expiration day the risk profile of a naked put is the same as a covered call but what about post-expiration date?

Sell a naked put (ATM) for $1 and the stock price is $5 less on expiration date = $4 loss.

Purchase stock and sell a covered call (ATM) for $1 and the stock price is $5 less on expiration date = $4 loss BUT one still owns the stock and isn't forced to do anything with the stock.

If the stock regains the $5 drop in share price the following week, the naked put seller still has a $4 loss. The covered call writer has a $1 gain. {Of course if the stock continues to drop the loss would exceed that suffered by the naked put seller}

Synthetic equivalents are similar, but only if one closes out all positions on the same date (or I guess the naked put seller could buy the stock on expiration date so as to be in the same position as the covered call writer).

Comments?

Theta

 

[MTE]

Quote from theta636:

Synthetic equivalents are identical?? I agree that on expiration day the risk profile of a naked put is the same as a covered call but what about post-expiration date?

Sell a naked put (ATM) for $1 and the stock price is $5 less on expiration date = $4 loss.

Purchase stock and sell a covered call (ATM) for $1 and the stock price is $5 less on expiration date = $4 loss BUT one still owns the stock and isn't forced to do anything with the stock.

If the stock regains the $5 drop in share price the following week, the naked put seller still has a $4 loss. The covered call writer has a $1 gain. {Of course if the stock continues to drop the loss would exceed that suffered by the naked put seller}

Synthetic equivalents are similar, but only if one closes out all positions on the same date (or I guess the naked put seller could buy the stock on expiration date so as to be in the same position as the covered call writer).

Comments?

Theta

Well, exactly. Synthetic relationships hold throughout the options' life, once options expire the relationships disappear as the options in question no longer exist.

 

[ddunbar]

I'm curious. With a $50k account and it appears that you are just starting out trading, why did you choose options as a trading vehicle? What attracted you to options over say, futures?

 

[theta636]

Quote from MTE:

Well, exactly. Synthetic relationships hold throughout the options' life, once options expire the relationships disappear as the options in question no longer exist.

Okay-- just wanted to make sure all readers realize that some equivalents are "more equal than others" depending on the circumstances.
Theta

 

[MTE]

Quote from ddunbar:

I'm curious. With a $50k account and it appears that you are just starting out trading, why did you choose options as a trading vehicle? What attracted you to options over say, futures?

I'm guessing he likes the idea of losing money even when you're dead right on direction.

 

[momoneythansens]

One is not "more equal than the other".

Your own post illustrates that this is not the case

Quote from theta636:

Okay-- just wanted to make sure all readers realize that some equivalents are "more equal than others" depending on the circumstances.
Theta