Hi everyone. I am new to this forum and in real life I don't have anyone to bounce ideas off of. I think I have found an edge and would like some opinions on a new strategy Im thinking about. 09' could not have been better but I have taken it hard in the shorts recently and have given back 12% of my account and I am really bumming out. So, before I try this with money I would like to hear your thoughts.
I want to create a long synthetic stock (futures) option with long term or LEAPS options on a stock with ATM options. This position should be able to be created for very small debit if any at all. Then I want to sell a near term slightly OTM call to capture credits. The synthetic stock should act like regular stock and if Im assigned I am covered by the long LEAPS. If not assigned write more calls the next month etc.
As a hedge I want to create a similar short synthetic stock position on the same stock with the same expiration and sell OTM puts against the short synthetic stock. Everything same as above except short.
Both sales cant be in the money at expiration. Though both may expire worthless. Additionally at expiration both the long and short positions should be worth exactly the same as each other or nearly so because what one position lost the other gained. There is little if any residual loss of value due due to theta decay but its roughly the same for both LEAPS positions and where one position in each side of the same transaction lost theta the opposite side gained.
I am basically considering this as a six legged trade. I am fiddling with the idea of selling both calls and puts ATM and accepting there will be an assignment. What am I missing? Where is the risk?
I know I have been long winded here but thanks for your time.
I want to create a long synthetic stock (futures) option with long term or LEAPS options on a stock with ATM options. This position should be able to be created for very small debit if any at all. Then I want to sell a near term slightly OTM call to capture credits. The synthetic stock should act like regular stock and if Im assigned I am covered by the long LEAPS. If not assigned write more calls the next month etc.
As a hedge I want to create a similar short synthetic stock position on the same stock with the same expiration and sell OTM puts against the short synthetic stock. Everything same as above except short.
Both sales cant be in the money at expiration. Though both may expire worthless. Additionally at expiration both the long and short positions should be worth exactly the same as each other or nearly so because what one position lost the other gained. There is little if any residual loss of value due due to theta decay but its roughly the same for both LEAPS positions and where one position in each side of the same transaction lost theta the opposite side gained.
I am basically considering this as a six legged trade. I am fiddling with the idea of selling both calls and puts ATM and accepting there will be an assignment. What am I missing? Where is the risk?
I know I have been long winded here but thanks for your time.
