The problem with calendar spreads

"If the stock XYZ for example decreases further to 7.60 you can buy an other 196 stock to re-hedge your position and thereby locking in profits."
Either I am misreading this, or I am ignorant about hedging positions. As I read the post, you buy the 1000 shares of stock , then buy 25 puts as a hedge. As the stock goes down in value to $8.02 you buy more stock, you keep buying more of it at $7.60 as a hedge. A hedge to what and how are you locking in profits? Wouldn't you be much better off selling some of your stock at $8.02 and the more at 7.60 and letting your puts make you $$. Or instead of buying stock at those prices, buy more puts.
 
Hi Chrismontez,

I do not understand your posting!.
When underlying values changes the delta's op options related to that underlying will change to. The change in delta's of an option is called gamma.

If you want to read more about this subject a good start would be the book:

Option Volatility & Pricing, written by Sheldon Natenberg.

Regards,

AJJ
 
AJJ ..FYI...all of your 8 posts have to do with spam...if your spam costs money then it is against the rules to promote on ET without being an ET sponsor.
 
Dear RichardRimes,

It is totally not my intention to produce spam.
I am sorry for creating this feeling.

Regards,

AJJ
 
Well I am far from an expert in option pricing, but I can do simple math. Your quote says that you bought stock at $8.58 it dropped down to $8.02 so you bought more. It dropped down to $7.60 so you bought more stock to" lock in your profits".
Are you talking about locking in your profits on the puts and hedging against the stock going up in value by buying more stock?

If so, wouldn't you be better off just cashing out the puts and the stock because if the stock keeps sliding you will lose more $ on the stock you are adding. If your goal is to keep establishing a delta neutral position, then even if the puts and stock increase/decrease in tandem, you are losing the time value on the puts and gaining nothing by holding them as far as I can see.
 
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