Registered: Sep 2008
07-15-12 06:55 PM
Quote from hedgeman:
Good to see someone looking outside the box. Its an unusual risk profile, but interesting. I can't make out the profit potential without additional trades (adjustments) at expiration and what the margin requirement is? What is the plan as market moves either direction?
Thanks for your comment!
There are adjustments to this trade:
1. If the market goes up, the trader sells calls.
2. If the market goes down fast, the trader unwinds the whole position. If it goes down slowly, the PnL will probably hit the high of the PnL graph on the left side. The position should be unwinded and profits should be taken.
I see there is more potential to create better adjustments for the case that the price goes down.
The margin requirement is USD 15,000. The profit potential is unlimited on the upside. On the downside, there can be a loss. However, please note that if the market crashes immediately, the trade should make some profit (white line).
Feel free to suggest better adjustments...