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Selling calls against Leaps
- Thread starter tex2244
- Start date
Just for fun,
does anybody have follow Terry Tip's recently because it seem to have switch on option for the SPX, mini-Nasdaq (MNX) and Morgan Stanley High-Tech (MSH)?
does anybody have follow Terry Tip's recently because it seem to have switch on option for the SPX, mini-Nasdaq (MNX) and Morgan Stanley High-Tech (MSH)?
Quote from Sigsbee:
On the leaps covered call, there is also the risk of entire loss of the long option (the leap) if the underlying plummets, but there is also, unlike the standard covered call, theoretically unlimited risk if the underlying price rockets skyward
I really don't understand this section. The calendar call spread ought not have unlimited upside risk. If underlying went up a lot, you would be exercised so the next step to exercise your LEAP. Even if it resulted loss because of the difference between the two strike, you wouldn't have unlimited loss. Moreover such an assignment would be profitable if, as you suggested, you owned in-the-money LEAP.
Stau away from it those "gurus" the only money those gurus make is from their memnership fees (tell them to show you their trading account to prove what they preach).
Those strategies will only make money if the market stays flat for a month (almost never hapens) or market declines very little or raises a little in a month (rarely hapens).
Last time it happened was in 2003 from April on, if you followed Terrys Tips strategy you would make money.
Any market volatility in a month in either direction will lose you money, if market goes up delta of your short calls wil shut up more than delta of your leaps, gains from long calls and time delay of short calls will not cover your loss (You will have to cover your short calls for a total loss or be called out -also loss).
If the market or stock goes down your short calls will expire wortless, but in most cases will not cover your loss on the leaps you own.
I played this strategy last year from Jan to Oct, lost 30% of my account.
Playing indexes will not work either. Commision cost and big spreads on leaps don't help either.
Even worse are the scammers from Compoundstockearnings.
Their strategies call for never selling the leap, even if it goes down (Wonder if they tried it with Merk or other fallen so called "blue chips" which may not recover by the time your leap expires).
These people should be put in jail way before they locked up Mata Stuart.
The only money they make is from memberships and their "seminars" they sell to suckers for several grants a pop.
Again tell them to show you their brokerage statements, or their members statements (which they often use as shills) to tout their croocked wares.
Those strategies will only make money if the market stays flat for a month (almost never hapens) or market declines very little or raises a little in a month (rarely hapens).
Last time it happened was in 2003 from April on, if you followed Terrys Tips strategy you would make money.
Any market volatility in a month in either direction will lose you money, if market goes up delta of your short calls wil shut up more than delta of your leaps, gains from long calls and time delay of short calls will not cover your loss (You will have to cover your short calls for a total loss or be called out -also loss).
If the market or stock goes down your short calls will expire wortless, but in most cases will not cover your loss on the leaps you own.
I played this strategy last year from Jan to Oct, lost 30% of my account.
Playing indexes will not work either. Commision cost and big spreads on leaps don't help either.
Even worse are the scammers from Compoundstockearnings.
Their strategies call for never selling the leap, even if it goes down (Wonder if they tried it with Merk or other fallen so called "blue chips" which may not recover by the time your leap expires).
These people should be put in jail way before they locked up Mata Stuart.
The only money they make is from memberships and their "seminars" they sell to suckers for several grants a pop.
Again tell them to show you their brokerage statements, or their members statements (which they often use as shills) to tout their croocked wares.
Quote from IV_Trader:
what do you think about buying ATM leaps straddle and selling Current Month the same straddle(with ratio and preferably with some skew).
Other that rising IV , what can go wrong here?
There is no need for a straddle here. Do EITHER the call OR the put--doing both is redundant, because on a strong move, both the call or put would go to parity (one would be worthless, the other would be ditm) anyway.
The only exception to this would be if you actually want to OWN the LEAPS straddle after the near term has expired. This would be a way to "lower your cost" while giving up some profit potential until the near term has expired. If the underlying took off, the profits from the long LEAPS straddle would be hamstrung by the short near-term straddle.
I do calendars (limit orders) whenever vega is low (it's been a good summer for these). I stick to selling the front month, buying one month out (now I would sell Sept, but Oct or Nov).
Quote from smilingsynic:
There is no need for a straddle here. Do EITHER the call OR the put--doing both is redundant, because on a strong move, both the call or put would go to parity (one would be worthless, the other would be ditm) anyway.
The only exception to this would be if you actually want to OWN the LEAPS straddle after the near term has expired. This would be a way to "lower your cost" while giving up some profit potential until the near term has expired. If the underlying took off, the profits from the long LEAPS straddle would be hamstrung by the short near-term straddle.
I do calendars (limit orders) whenever vega is low (it's been a good summer for these). I stick to selling the front month, buying one month out (now I would sell Sept, but Oct or Nov).
run scenario for calls only vs. the straddle play.
Stock at 40 , IV at 30,short ONE month , long TWO month,ratio 1.40.
If month from now XYZ=36 calls only will lose big while straddle statedly will make money