What's wrong with this system ?

[andrey_tech]

Example:

Short -100 any stock @ 50.00
Buy 47.50 Call @ 3.30~50

Two possible scenario :

Bad one : It goes to 55.00
What happen in this scenario ? Is that call cover my short
with limited losses or without loss or not.

Good one : It goes to 45.00
Option expires and short trade covered with $500 gain.
500 - 330 = $170 total profit.

Sorry for my dump question. But where did I make a mistake about this strategy ?

 

[MTE]

Quote from andrey_tech:

Example:

Short -100 any stock @ 50.00
Buy 47.50 Call @ 2.50~70

Two possible scenario :

Bad one : It goes to 55.00
What happen in this scenario ? Is that call cover my short
with limited losses or without loss or not.

Good one : It goes to 45.00
Option expires and short trade covered with $500 gain.

Sorry for my dump question. But where did I make a mistake about this strategy ?

Nothing wrong with your strategy, except that you can achieve the same thing by just buying a put option (47.5 strike in your example). Short stock+long call is the synthetic equivalent of long put.

 

[dsandraz]

> Bad one : It goes to 55.00
> What happen in this scenario ? Is that call cover my short
> with limited losses or without loss or not.

In your example at 55 you will have a cost of $180.
So, no free lunch , sorry ;-)