Stock repair strategy

[wxytrader]

MARA 16.95
1000 shares @ 22.25
Total loss: 5300

Stock repair strategy
10 17C @ 2.18
20 20C @ .89
Total debit: -400

Results if price goes to 19.83 @ expiry:

10 calls = 19.83-17 =2.83 -2.18=.65*10*100=650
20 short calls = 1780
Stock increase = 19.83-16.95 =2.88 * 1000 = 2880

Total: 2880+1780+650=5310
Recovery complete!

But I am getting different results on option creator

 

[traider]

what if it goes to 0?

 

[wxytrader]

Both our models agree on the ratio spread:

So if we put it together with the stock position we should get:

MARA 16.05
Avg price: 22.25
Loss to recover: -5300
@ 20 price has increased $3.05 x 1000 = 3050 + 2600 (ratio spread) = 5650
So my position recovers just under $20 as my spreadsheet shows.

Option creator has the position recovering @ 20 (popup) but it doesn't match with the chart..Also, doesn't the position max out at the short call strike which is your MAX profits?

If I hover over 20.32 its showing a -1702 loss????
Here have a go: https://optioncreator.com/stt24oo

 

[poopy]

Wrong

 

[wxytrader]

Wrong

I know but where? If you look at the ratio spread as a separate position then both models agree @ 2600 when price expires @ 20, and the stock recovers 3050. ???

If you use the ratio spread math its: higher strike - lower strike + debit/credit + lower strike.

so 20-17=3+-.40+17=19.60 break even on the spread.

 

[wxytrader]

what if it goes to 0?

"Downside protection is not considered with a stock repair."

It carries no added risk as you should be able to open at a credit. Same as just holding a long position...it only improves your break even.

 

[poopy]

repair stock by adding more gamma risk?
Is this the new way?

Gamma risk to D1? It's only shares.

 

[wxytrader]

repair stock by adding more gamma risk?
Is this the new way?

There is no added risk if you can open for a credit..but probably not with the spread. Here you could open 17/20 for a $-180 debit...lowering the the break even from 22.25 to 19.72...according to my sheet.

The price really jumps around on the ratio spread...from .11 to .50!

 

[wxytrader]

Breakeven for Ratio Call Spread

• As Net Credit = Higher Strike Price + Difference in strike + Net Premium Received.
• As net Debit = there will be two breaks even. Upper Breakeven = Higher Strike Price – Difference in strike + Net Premium paid.
• Lower Breakeven = Lower Strike + Net premium Paid.

if the ratio spread is: 17/20 @ a debit of -.18

Higher break even: 3+-.18=2.82+20=22.82
Lower break even: 17+-.18=16.82

You can see my spreadsheet aligns with the math!

Option creator confirms it!

So all we have to do is add the ratio spread gains to the stock position gains... right?

 

[poopy]

Tao's idea to short the backspread is a good one. Maybe post an expiration next time? I'd did think any of you have posted a date.

I'd solve for a date allowing for zero outlay which is probably achievable with the following week's series.