Name of Option Position?

oldtime · Jul 28, 2011

Quote from Eliot Hosewater:

PNL - P&L - the profit/loss graph at expiration.

If you just want to be long stock try short put+long call, but the stock needs to move before expiration. Cheaper than buying stock but they don't last forever, plus you get the same downside as naked long stock.

yeah no, the premiums are fat and too much to go long. Going long with a protective put too expensive.

Call spread too expensive.

short put+long call too much downside risk.

Let me think about that 3 short puts at different strikes you talked about.

atticus · Jul 28, 2011

Quote from Eliot Hosewater:

Isn't that still two short puts?

No, long UL, short put, short call.

Eliot Hosewater · Jul 28, 2011

Quote from atticus:

No, long UL, short put, short call.

Unless my aneurysm just popped, long stock+short call = short put.

atticus · Jul 28, 2011

Quote from Eliot Hosewater:

Unless my aneurysm just popped, long stock+short call = short put.

Right, but not a natural put. Simply differentiating between his two lot strangle, not dissecting. They're equivalent to two short ATM puts, but I assume he wants to be initially unbounded.

atticus · Jul 28, 2011

Quote from oldtime:

No, I just want to be flat out long, but even the minimum contract is too volatile for my account (and I probably shouldn't even be trading it) so I have to give up something somewhere.

Give me some time to think about it. I need to go figure out what PNL distribution is.

Then don't sell puts or calls. You're capped either way.

oldtime · Jul 28, 2011

at anyrate, the exit strategy is, if the short puts go ITM I need to take my loss. 2 1/2 losers against 2 winners, hopefully the short calls will expire OTM. After all, I'm a bull and should be punished if I'm wrong.

If the short calls go ITM I can take a small profit, 2 1/2 winners against 2 losers,and hope the short puts expire OTM. Or if there's any time left just add another UL and try to outlive the short calls.

And then there's the middle ground which should be profitable.

Keep in mind, this is just a one time deal. It will all be over sometime in AUG (if not sooner.)

oldtime · Jul 28, 2011

Quote from atticus:

Right, but not a natural put. Simply differentiating between his two lot strangle, not dissecting. They're equivalent to two short ATM puts, but I assume he wants to be initially unbounded.

no, I'm not rich enough to be unbounded. So, I gotta be capped.

atticus · Jul 28, 2011

Quote from oldtime:

no, I'm not rich enough to be unbounded. So, I gotta be capped.

You're missing the point. You risk is unlimited (well, bound to zero on shares) while your upside gains are capped to strike-spot+premium.

atticus · Jul 28, 2011

Quote from oldtime:

at anyrate, the exit strategy is, if the short puts go ITM I need to take my loss. 2 1/2 losers against 2 winners, hopefully the short calls will expire OTM. After all, I'm a bull and should be punished if I'm wrong.

If the short calls go ITM I can take a small profit, 2 1/2 winners against 2 losers,and hope the short puts expire OTM. Or if there's any time left just add another UL and try to outlive the short calls.

And then there's the middle ground which should be profitable.

Keep in mind, this is just a one time deal. It will all be over sometime in AUG (if not sooner.)

I like the fact that you understand the "punished if wrong" mantra. Most expect a nice smile on PNL which never dips below the x-axis. Don't use a binary condition to describe your win/loss. The ratio is meaningless bc it doesn't take into account intrinsic premium.

My point is that you're limiting your upside to the "strike - spot + premium" which may be acceptable, but I would guess you would want something approaching 1:1 risk. Your position gears risk to the downside, so the PNL is asymmetrical against you (risk/reward >1).

oldtime · Jul 28, 2011

Quote from atticus:

I like the fact that you understand the "punished if wrong" mantra. Most expect a nice smile on PNL which never dips below the x-axis. Don't use a binary condition to describe your win/loss. The ratio is meaningless bc it doesn't take into account intrinsic premium.

My point is that you're limiting your upside to the "strike - spot + premium" which may be acceptable, but I would guess you would want something approaching 1:1 risk. Your position gears risk to the downside, but the PNL is asymmetrical against you.

ok, that's good enough for me. If I just flip a coin I at least have a 1:1 chance right?

The problem is, if I just go long and get stopped out, I have no other plan than to just get long again.

I don't understand everything you say, but I understand what "PNL assymmetrical against you means." Thanks