Options Coach, thanks for the words of advice and encouragement. I am learning to cope with the rough terrain here. But, as rough as it can get, there's a lot of comfort from knowing that there's also a lot of class in this crowd, especially from folks like Mav, Ursa, Daddy's Boy, and of course you. No doubt I've omitted several others who are also praiseworthy and deserving of my sincere thanks. Bob
It is very true that comfort and experience should determine what strategies to deploy. My last post was merely intended to show that the AAPL position you ended up with is a perfect example why equivalences are important: The fact that you own 8 long puts is in itself not that important. What is important is that hedging long bearish positions is unusual and, most important, that hedging will give you a long straddle/strangle. Those are about the worst to posess during numbers. It shows that viewing your position through its equivalences can give a whole different look at what to do. It is true that the IV of later-month options is not as sensitive to near events, but be aware that the vega of these options (the IV-sensitivity of the premium) is magnitudes greater than of that of the near month. If their IV would drop too, the impact would be noticable. Just for fun do a paper trade and buy 8 120 calls to hedge and look at the value of the total position after tomorrow. Personally, if I owned 8 long puts to be bearish on AAPL I would just use them as such. If AAPL goes the wrong side I'd just close them out (or maybe buy back stock in your case). This can be easily set up with stoploss orders. Ursa..
This reminds me, someone who was good at calling people knuckleheads then proceeding to give very good information in an easy to digest format was momoney. Haven't seen him around in awhile. Anyone know what happened? I really liked that guy.
I would like to ask the gang to weigh in on what their favorite income strategy is. Mine is one which is done by very few people, but popularity is not a requisite to money making. My favorite strategy is Covered Put Writing. That's right. Shorting the stock, and writing puts against it. Because it involves shorting stock you have to know the rules and also accept the fact that you cannot do this in an IRA or 401(k). Also, stay away from dividend paying stocks, or if you do play them, be aware of all aspects relating to dividend declarations. Covered Put Writing - I can already hear the drums beating. Yes, I know that the risk graph is identical to a naked call write. No, I would never consider this with Google. Yes, when I do it with AAPL I do get nervous...hence an occasional mixture with long calls and OTM Butterfly calls. I'll share with you all something I picked up from the writings of George Fontinills and also Larry McMillan. That is, keep your eye on IV and look for spikes. When you see a spike but there is no announced public reason, there still is a reason. Something is going to happen, but the public has not yet been clued in. As McMillan says, it is illegal to profit from undisclosed insider information, but since IV spikes are public information, there is nothing whatsoever illegal in attempting to take strategic advantage of such spikes. About two weeks ago in the Scott Kramer forum at Optionetics, I mentioned that for some unknown reason, the IV of the short term options on AAPL was spiking SOONER than it normally does prior to earnings release. Sure enough. at noon a week ago, Jobs came out with his I-phone announcement and we all know what happened. You all know what my present AAPL position is. But what I have not previously shared with you is that about two weeks ago, when AAPL was at $85 and the IV spiked, I wrote 8 Jan $85 Puts against the 800 short shares. Nice thing about that was my fill price had an IV of about 60, whereas it normally would carry about a 42. Early last week, after the stock took that quick 10 point jump, I was able to buy back the Puts for a nominal price. Yes, I am aware that I took about an $8,000 hit on the shorts, but that loss was significantly mitigated by the aforementioned IV play with the puts. One thing you guys can take to the bank on my postings. While I won't always be strategically right, I will always be honest and sincere and will never BS you. Bob
Just in case someone was wondering what I meant about an informative post without having to get nasty or jump on the original poster...
This thread is getting pretty long so rather than further clutter this thread with my nonsense about the covered put write, I put it on a new thread. Bob