Reverse Collars

Daddy's Boy and Others...So often posters here try to inject the question of whether a particular strategy is "superior" to another strategy. With all of the postings I have done I never look at things comparatively. Options trading is not a one size fits all proposition. What works for person A might not necessarily work for person B. One of the beauties of options trading is that there are many many alternatives available. I won't even get into a discussion of whether trading options is "superior" to trading the underlying securities. I believe that what I am demonstrating in this thread is an open mindedness when it comes to blending options with the underlying securities.

The only thing I'm firm about is my flexibility.

4Q
 
Bob
Noone is arguing about one strategy better than another. All some of us are trying to say is why make things complex if you can do it exactly the same way using synthetics.
Your reverse collar - 3 steps (short stock, short put, long call)
Synthetic - 2 steps (long put, short put).
That's all.
daddy's boy
 
Quote from exQQQQseme:

I believe that what I am demonstrating in this thread is an open mindedness when it comes to blending options with the underlying securities.
4Q
More...
This thread was about the reverse collar. If you are now blending options with u in the fractions mentioned earlier then you no longer have a reverse collar or married call position. The thread then becomes a discussion point for gamma scalping calendars, diagonals or whatever position the original reverse collar has morphed into. Nothing wrong with that, but it's not the original topic that I thought we were going to discuss - the management of a reverse collar and staying within the boundaries of the reverse collar/married call definition.
daddy's boy
 
Thanks Daddy's Boy. As we go down the road and I show the various revisions to my AAPL trade, you will observe that more often than not I have combinations which don't meet the definition of any defined strategy, synthetic or otherwise. I promise, it will be interesting.

Meanwhile, we will all have to be patient. I have no particular like or dislike for AAPL. It's stock is (a) radical, (b) usually trendy for a few days, (c) does not currently pay dividends, and (d) has an active market, both for the stock and the options.

4Q
 
To 4Q:

1) I don't see any relevance b/t your AAPL position started in November and this diagonal, started for the purpose of this thread. This is a new position, going forward.

2) It makes no difference which of the two synthetics you start with (collar vs. vertical... or in this case, diagonal collar versus diagonal spread). Any adjustment made to one position results in an equivalent position if made to the other.

To MTE et al :

The only advantage (to me) of a collar over its equiv. spread is that IF the stock moves in your direction and IF you trade intraday reversals, the stock component is a better vehicle because of the higher delta, smaller spread and greater liquidity.

I'd like to thank all participants in this thread for their contributions. I appreciate the different points of view which help to clarify my understanding of a strategy as well as its strengths and weaknesses.

Spin
 
Quote from exQQQQseme:

Thanks Daddy's Boy. As we go down the road and I show the various revisions to my AAPL trade, you will observe that more often than not I have combinations which don't meet the definition of any defined strategy, synthetic or otherwise. I promise, it will be interesting.

Meanwhile, we will all have to be patient. I have no particular like or dislike for AAPL. It's stock is (a) radical, (b) usually trendy for a few days, (c) does not currently pay dividends, and (d) has an active market, both for the stock and the options.

4Q
More...
Thanks Bob, I'm looking forward to following your management of this trade, I don't think it's been done before on ET.
Best
daddy's boy
 
Daddy's Boy, if I misled you or anyone else in the beginning of this thread, I apologize. I'm about trying to make money and trying to help others also make money. I attempt this without any regards whatsoever for definitional boundaries.
 
Quote from spindr0:


To MTE et al :

The only advantage (to me) of a collar over its equiv. spread is that IF the stock moves in your direction and IF you trade intraday reversals, the stock component is a better vehicle because of the higher delta, smaller spread and greater liquidity.

Spin
More...

Spin,

The spread and liquidity might be a valid point, but the delta is not. The stock has a higher delta, but the overall portfolio has the same delta as its equivalent vertical.
 
Quote from exQQQQseme:

YIP, how does one determine what the "equivalent vertical" is?

4Q
More...

Replace your long call with your short stock by the synthetic put. Since your definition of "reverse collar" changes, you might not get a vertical.

If both call and put have the same expiration month, you will get a vertical.

Lets forget the terminology as we are only interested in making money. The combined delta of stock + call = delta of the synthetic put.
 
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