What am I doing?

W

WallStGolfer31

Guest
My position consist of both the purchase and sale of options at different strikes with the same expiration. It almost always includes shorting the underlying. It's net theta is earning me a nice profit per day due to the depreciation of the short leg of the spread. Did I mention the the underlying price movement has almost no effect on my net return?

What am I setting up?
 
Quote from Profitaker:

No idea, but it might help to know the strikes and quantities !
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The Stock, XYZ, is at $60.85

The calls expire in 25 days

I buy 65, XYZ $60 calls at 1.79

I sell, 123, XYZ $65 calls at 0.29

and I short 2280 shares of XYZ



Does that help? :)
 
Quote from WallStGolfer31:

The Stock, XYZ, is at $60.85

The calls expire in 25 days

I buy 65, XYZ $60 calls at 1.79

I sell, 123, XYZ $65 calls at 0.29

and I short 2280 shares of XYZ



Does that help? :)
More...

short stock + long 60 calls looks like delta neutral , so you basically short 123 naked calls . What happens if price goes to 70 ?
 
Without the short stock, that would be called a ratio spread or backspread.


Quote from WallStGolfer31:

The Stock, XYZ, is at $60.85

The calls expire in 25 days

I buy 65, XYZ $60 calls at 1.79

I sell, 123, XYZ $65 calls at 0.29

and I short 2280 shares of XYZ



Does that help? :)
More...
 
Quote from IV_Trader:

short stock + long 60 calls looks like delta neutral , so you basically short 123 naked calls . What happens if price goes to 70 ?
More...


Short stock + long 60 calls, isn't like having long puts?
 
If you replace the short stock with its synthetic (-call+put) you'll get a straddle plus a pretty large 60/65 ratio call spread.

Why do you want to open this position? What's the underlying?
 
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