Vertical Spreads for Aggressive Growth

cnms2,

if you dont mind sharing, whats your reasoning behind going short the stock and long the puts at the same time? I've seen you do this before.
 
I'm running a comparative evaluation of how my expectancy is affected by trading straight in the money options as a surrogate for stocks. Straight options are less risky but I'm penalized by the large slippage (see my recent HPQ P/L that was +$33.87 for stock trading, but -326.11 for options)
Quote from rallymode:

cnms2,

if you dont mind sharing, whats your reasoning behind going short the stock and long the puts at the same time? I've seen you do this before.
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Quote from cnms2:

I'm running a comparative evaluation of how my expectancy is affected by trading straight in the money options as a surrogate for stocks. Straight options are less risky but I'm penalized by the large slippage (see my recent HPQ P/L that was +$33.87 for stock trading, but -326.11 for options)
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i understand why one would prefer ITM options over stock and vice versa but the reason to put them both on at the same time eludes me.
 
As I said: it is part of a live trade evaluation that I started two and a half months ago. As I'm pretty risk averse, I'll probably conclude that the expectancy loss is a small price to pay for my peace of mind. :) Than I'll stop trading stock positions.
Quote from rallymode:

i understand why one would prefer ITM options over stock and vice versa but the reason to put them both on at the same time eludes me.
More...
 
As an example, this BA position I opened yesterday (I was watching it from Monday). I shorted 1,000 BA shares, but bto 12 BARR BA Jun 90 puts. BA moved nicely, but I still make $100 less on my options position because I still have 1,000 deltas in my stock position, but only 960 in my options position.

As a side note: I entered too early. I have to improve both my entry and exit timing, as it seems that usually I jump the gun.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1074928>
Quote from rallymode:

i understand why one would prefer ITM options over stock and vice versa but the reason to put them both on at the same time eludes me.
More...
 

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Quote from rallymode:

i understand why one would prefer ITM options over stock and vice versa but the reason to put them both on at the same time eludes me.
More...

I was wondering the same thing. I was trying to figure out if you were trying to leg into some kind of synthetic spread/combo that I couldn't see.:)

Now I remember that you said a while back that you were doing a side by side comparison of the two instruments.
 
 

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Quote from Cache Landing:

I was wondering the same thing. I was trying to figure out if you were trying to leg into some kind of synthetic spread/combo that I couldn't see.:)

Now I remember that you said a while back that you were doing a side by side comparison of the two instruments.
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Well due to the position deltas, one position would gain/lose more/less the other, so i suppose if a person wanted to diversify and be somewhere in the middle they would open them both up at the same time. Not sure how beneficial that is but that's the only thing that comes to mind.
 
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