Strategy

[spindr0]

Quote from atticus:

I am. This thread earns infinite points. It only required three pages.

Start deducting pts. We're heading for page 6

 

[Chuck Krug]

took the whole shabangle of the table
except the short fut

 

[Chuck Krug]

i can feel the love in the room

 

[Chuck Krug]

So i shorted 100 IWM
shorted 1 sep 70 put
bought 100 dia
and sold 1 sep 125 call

 

[MTE]

Quote from Chuck Krug:

So i shorted 100 IWM
shorted 1 sep 70 put
bought 100 dia
and sold 1 sep 125 call

Back to square one, huh!?

Why do you insist on making two trades instead of one?

 

[Chuck Krug]

to try and stay market neutral overnight

 

[Chuck Krug]

and because i'm stubborn

 

[MTE]

Quote from Chuck Krug:

to try and stay market neutral overnight

It's not about being market neutral.

Instead of shorting 100 IWM and 1 sep 70 put, you could've just shorted 1 sep 70 call and have the same exposure. Also, instead of buying 100 DIA and shorting 1 sep 125 call, you could've just shorted 1 sep 125 put.

Why make 4 trades and pay 4 commissions and slippage, when you can make 2 trades to achieve the same position!?

 

[Chuck Krug]

i would never short a put without the underlying

 

[atticus]

Quote from Chuck Krug:

i would never short a put without the underlying

It's convertible. Shorting the underlying and the put is synthetically equivalent to selling the call (same strike) outright.

I am selling the 170P when I go long 100 IBM and sell the 170C. The difference between the two positions is the conversion arbitrage. I realize you're stubborn, but it's more important that you "get it" then concern yourself with the additional $10 in commission and slip.

You are short a naked put when you buy XYZ and sell a call.