Bull Spreads not for traders?

Discussion in 'Options' started by Babak, Jul 1, 2002.

  1. redzuk

    redzuk

    Thanks Trajan, I'm going to look for those cheap flies. My reason for using options in the past was simply for leverage, and based 100% on the chart of the underlying. Sounds like you and rs7 agree with Mcmillan about verticals being a poor choice for traders.

    To speculate on short term using options for leverage asuming you dont want to hold sold naked options overnight, simple long options may be the best way to go?

    Last week I picked cdwc from the qcharts hotlist for most volatile stocks as one that might go up.

    Wends with the stock 44.87 these prices were available
    bull call 40-50 5.75 debit
    40-45 3.95 debit
    45-50 2.20 debit

    bull put 40-50 4.30 credit
    40-45 1.25 credit
    45-50 2.65 credit
    All prices buy offer sell at bid, with wide spreads.
    When you look at those prices do you intuitively see a trade? I looked at closing all of the positions today with stock at 48.10. And the verticals just dont profit enough, to make up for the protection you get against the stock remaining unchanged and IV decreasing.
     
    #21     Jul 5, 2002