Strategy

Chuck Krug

Chuck Krug

short ES sep @1250
long es dec @1245

short sep 1255 put @37
short dec 1240 call @65

rationale: selling options and profiting from deflating time value

will do more calculation which series to sell to have the maximum profit from time value and volatility

any suggestions are more than welcome
 
1 of the problems is obvious right now
as the put or call moves more in to the money, the 1 leg appreciates faster than the other
which is the case of the put at the moment
 
Short sep futures+short sep 1255 put=short sep 1255 call.
Long dec futures+short dec 1240 call=short dec 1240 put.

So, your position reduces to a "calendarized short strangle".
 
Quote from Chuck Krug:

how can it be naked?
the short put is covered by the short fut
and the short call is covered by the long fut
More...

The resulting position I have mentioned is a synthetic position.

Your 4 positions synthetically reduce to 2 naked short option positions.

In other words, instead of trading this:

short ES sep @1250
long es dec @1245
short sep 1255 put @37
short dec 1240 call @65


You can trade the following:

short sep 1255 call
short dec 1240 put

and achieve the same position.
 
but if i were to be short the dec 1240 put
straight out
and say a bomb would explode and the sp would trade at 600, my losses would be enormous
were as now, i am short the fut contract
 
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