Very interesting. You get a sort of ratioed (8:20:10 + 10 long july 100 calls) 95/110/120 july call fly? But when plotted this 'thing' looks like a simple long call. Did I misunderstand this somewhere along the way?
daddy's boy
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Reverse Collars
- Thread starter Eliot Hosewater
- Start date
daddy's boy
Daddy's Boy, thanks for the posting. You inquired as to whether you might have missed something. Either you did, or I was not clear in what I am trying to say.
First, a 95/110/120 is not a natural butterfly where your broker would not require a cash hold back. For that, you would need either the 95/110/125, or as I am suggesting, the 100/110/120.
The other main point I am trying to make is that one should look at the proposed butterfly INDEPENDENTLY from the present APPL configuration I have. My objective is not to combine the whole thing and then see what I have come up with. I feel so strongly about this independence thing that I am even contemplating doing the butterfly inside an IRA, while the rest of the AAPL is in a regular account, where stock shorting is permitted.
In a recent posting by Maverick74, he mentions that it is not the actual trade that is important, it is the execution. I have long been a believer of this and I was glad to read that he feels the same.
Anyway, back to the Butterfly. Looking at this independently of the rest of my AAPL positions, my OBJECTIVE is to leg in so that I can come up with either a risk free butterfly or one with a miniscule net debit. The July $120C is presently going around $3.40. My modus operandi would to put in a GTC Bid for no more than $3.00. If the stock goes down and it fills, fine. If not, I've lost nothing.
If it fills, then the hope would be for the stock to rise to the point where the July $110C x 2 Bid would be $3.00 more than the $100C Ask. I'm trying to get the reader here to focus on the money and not on the definition semantics.
I hope I have answered your question in an understandable manner.
Bob
First, a 95/110/120 is not a natural butterfly where your broker would not require a cash hold back. For that, you would need either the 95/110/125, or as I am suggesting, the 100/110/120.
The other main point I am trying to make is that one should look at the proposed butterfly INDEPENDENTLY from the present APPL configuration I have. My objective is not to combine the whole thing and then see what I have come up with. I feel so strongly about this independence thing that I am even contemplating doing the butterfly inside an IRA, while the rest of the AAPL is in a regular account, where stock shorting is permitted.
In a recent posting by Maverick74, he mentions that it is not the actual trade that is important, it is the execution. I have long been a believer of this and I was glad to read that he feels the same.
Anyway, back to the Butterfly. Looking at this independently of the rest of my AAPL positions, my OBJECTIVE is to leg in so that I can come up with either a risk free butterfly or one with a miniscule net debit. The July $120C is presently going around $3.40. My modus operandi would to put in a GTC Bid for no more than $3.00. If the stock goes down and it fills, fine. If not, I've lost nothing.
If it fills, then the hope would be for the stock to rise to the point where the July $110C x 2 Bid would be $3.00 more than the $100C Ask. I'm trying to get the reader here to focus on the money and not on the definition semantics.
I hope I have answered your question in an understandable manner.
Bob
Got it thanks. You are actually looking at 2 separate trades, as you've stated - one has nothing to do with the other. One is a married call and the other a legged fly. They have nothing in common except the underlying.
I must be missing something again - how is this an example of how you trade a married call/reverse collar? You seem to have simply opened a new trade, although interesting it is totally unrelated nevertheless.
Best
daddy's boy
I must be missing something again - how is this an example of how you trade a married call/reverse collar? You seem to have simply opened a new trade, although interesting it is totally unrelated nevertheless.
Best
daddy's boy
Daddy's Boy, I am attempting to extricate myself from these Boards because I'm frustrated by so many of the responses that seem to have only a provocative motive. Nevertheless, you seem like a real nice guy and have asked a question that deserves an answer.
True, in a large sense the purchase of the $120 call has nothing to do with the present married call configuration and the related Reverse Collar. You have me right in that if I can make a low (or zero) net debit butterfly out of it, it will be completely independent from the other part. But, as I mentioned a day or two ago, the other part presently has a net negative delta of about 340. So, whatever positive deltas I can pick up by starting with the $120C's while I'm hoping to be able to place the Butterfly, will be pure gravy and go right to the bottom line.
So, in one way it's independent. In another way it's not. Hopefully nobody gives a damn. Certainly I don't.
True, in a large sense the purchase of the $120 call has nothing to do with the present married call configuration and the related Reverse Collar. You have me right in that if I can make a low (or zero) net debit butterfly out of it, it will be completely independent from the other part. But, as I mentioned a day or two ago, the other part presently has a net negative delta of about 340. So, whatever positive deltas I can pick up by starting with the $120C's while I'm hoping to be able to place the Butterfly, will be pure gravy and go right to the bottom line.
So, in one way it's independent. In another way it's not. Hopefully nobody gives a damn. Certainly I don't.
Thanks for the feedback Bob.
I think I finally see what you're doing, correct me if I'm wrong. You are basically balancing deltas (or should I call it gamma scalping?) and it just so happens that making a fly serves that purpose or, put differently, a fly is the result of the delta balancing action?
This is indeed something I haven't really thought about much before. In the past I've adjusted according to my view on the underlying, never from a delta point of view.
Thanks.
Best
daddy's boy
I think I finally see what you're doing, correct me if I'm wrong. You are basically balancing deltas (or should I call it gamma scalping?) and it just so happens that making a fly serves that purpose or, put differently, a fly is the result of the delta balancing action?
This is indeed something I haven't really thought about much before. In the past I've adjusted according to my view on the underlying, never from a delta point of view.
Thanks.
Best
daddy's boy
Daddyâs Boy, what I am doing doesnât necessarily have a name. While I might from time to time have a feeling which direction a particular stock is going, the truth is that I really havenât a clue whether it is going to go Up, Down, or Sideways. I donât believe that anyone else has a clue either; however, thatâs not my call.
What I do is look at my present or contemplated stock or option positions and ask myself three questions: What if UP? What if Down? What if Sideways? Then I plan to position myself accordingly. It doesnât have a name such as delta balancing, gamma scalping, or anything else. This is not to say that I am oblivious to the impact of the four main âGreeksâ (Delta, Gamma, Vega, or Theta). I consider all three in my âWhat ifâ analysis.
All I need now is for some Smart Ass to post and remind me that Vega is not a letter in the Greek alphabet.
Bob
What I do is look at my present or contemplated stock or option positions and ask myself three questions: What if UP? What if Down? What if Sideways? Then I plan to position myself accordingly. It doesnât have a name such as delta balancing, gamma scalping, or anything else. This is not to say that I am oblivious to the impact of the four main âGreeksâ (Delta, Gamma, Vega, or Theta). I consider all three in my âWhat ifâ analysis.
All I need now is for some Smart Ass to post and remind me that Vega is not a letter in the Greek alphabet.
Bob
Lol, I think all the smart asses have gone home for the day.Quote from exQQQQseme:
Daddyâs Boy, what I am doing doesnât necessarily have a name. While I might from time to time have a feeling which direction a particular stock is going, the truth is that I really havenât a clue whether it is going to go Up, Down, or Sideways. I donât believe that anyone else has a clue either; however, thatâs not my call.
What I do is look at my present or contemplated stock or option positions and ask myself three questions: What if UP? What if Down? What if Sideways? Then I plan to position myself accordingly. It doesnât have a name such as delta balancing, gamma scalping, or anything else. This is not to say that I am oblivious to the impact of the four main âGreeksâ (Delta, Gamma, Vega, or Theta). I consider all three in my âWhat ifâ analysis.
All I need now is for some Smart Ass to post and remind me that Vega is not a letter in the Greek alphabet.
Bob
Cheers
daddy's boy
Either that or they're Googleing the Greek alpabet.
Have a great day. Let's not all die of boredom because the market is closed.
Bob
Have a great day. Let's not all die of boredom because the market is closed.
Bob
hi! i would like to understand 4Q's methods of trading these "reverse collars". The basic position is short stock with long calls and short puts. Are the options at the same strike? How would an up or down move in the stock be handled to capture profit? I hope this discussion can be restarted...