Coming back to optios. Need safer trades.

Discussion in 'Options' started by iSeriesGuy, Oct 24, 2010.

  1. I attended a seminar on basic & advanced options strategies over 10 years ago, and have only done sporadic options trading since. My trades have been mostly directional, and as Murphy would have it, were mostly losers (after a string of winners that made me feel invincible)... so I stopped trading for a while.

    From that original training, I distinctly remember there was one spread trade where, if it went against you, the worst case scenario was that you made a small profit. The problem is, I don't remember the name of that trade. Does this ring a bell with anybody?

    I'm also in the market to refresh my options trading knowledge, but hopefully for a few hundred dollars rather than a few thousand. Thanks.
     
  2. No such animal exists. If it did, no one would trade anything else.
     
  3. The only option strategy I can think of along those lines is not a spread, it's a collar. This assumes that you can execute it at the appropriate prices. However I believe you need to hold it to expiration for the guarantee (it can fluctuate before then) and the guaranteed profit isn't monumental.
     
  4. A color is all I can come up with as well. I'm still new at collars and have not yet seen a collar that guaranteed me a win. Can't a collar be considered a spread along with it's underlying instrument?

    Always need to learn more.
     
  5. Who's seminar did you attend? If you would rather answer privately, kindly PM me. Thanks in advance.
     
  6. A collar is equivalent to a vertical spread and ignoring the fortunate leg in, it definitely has a loss potential.

    Conversions and reversals etc. have locked in gains (carry rate) but I'd hardly call them spreads.
     
  7. Not a spread since a collar consists of a short call and a long put (or vice versa if short the underlying)

    Collar = UL - C2 + P1

    UL - C2 = - P2 (covered call = naked put)

    So Collar = P1 - P2

    ... where P1 and P2 are puts with different strikes and that's a vertical

    Clear as mud? :)
     
  8. One further thought. An iron condor, a combination of a put spread and a call spread, provides an opportunity to mitigate losses on the side that goes against you by rolling the opposing side once or twice in addition to the original spread on that side. I have done this on several occasions. Just recently the CALL spread side of an IC position I held suffered a 3.3% loss of funds at risk. But the PUT spread had two rolls for profits of 7.0%, 6.8% and 5.3%. The IC ended up with 15.8% profit for the 45 days or so I was in it even though one side suffered a loss.

    Does this sound familiar?
     
  9. Thanks. My bad. Typed response before engaging brain.
     
  10. If I have a covered call (ETFs) and buy a put at some strike at my risk level and depending on how much profit I have made to see what is my net cost. Will this help me. I trade only weekleys on ETFs.Please help.
     
    #10     Oct 25, 2010