Yeah commission intensive but im sure if you were to do those kind of trades your broker could work with you a little bit. Yeah hedging the upside is what those otm calls and puts are for.
optionscoach could you further explain this? Would he buy the extra calls or puts right at the wings of the fly or further away from the fly? How would this effect your breakeven points on the fly? Thanks YT
He has shown both at the wings and little further out. The graph can be played with and looks good initially as it almost works like a straddle. in that it is non-directional until theta kicks in. Graph one and see they are interesting in right situation.
You're referring to Tony Saliba, who wrote a very good book for anyone new to options trading --- The Options Workbook: Fundamental Spread Concepts and Strategies for Investors and Traders. optioncoach's book is --- The Option Trader Handbook: Strategies and Trade Adjustments by George Jabbour & Phillip Budwick.
The guy from market wizards did this at a different time: he was a market maker with a big edge because spreads were wide at the time, so he had a big theoretical edge. Doubt very much you could do this today with even close results.
mark trader, you might want to check out these Yahoo groups for ideas and advice: http://finance.groups.yahoo.com/group/OptionClub/ http://finance.groups.yahoo.com/group/ConservativeOptionStrategies/ There is a guy, Dr Joe (AKA gass20) who has been doing diagonal LEAPS spreads for a few years and claims to be making good money. He has posted his strategy for all to see. It involves buying OTM LEAPS calls on indexes and selling short term calls against the LEAPS. It is similar to a covered call, but using LEAPS instead of stock. As he points out if a stock goes to zero you lose 100% on the stock, but maybe 30% on the LEAPS. You might also Google for Collaring the Cube, a study by the University of Massachusetts that found a better return with less volatility by collaring the QQQQ with 6 month long puts and monthly short calls. They claim it is a 'new' strategy, but it should be the equivalent of simple put diagonals. BTW, it is not intended to be a monthly inceom strategy.
He also said he paid for his OTM lottery tickets by scalping, which shows he was a trader first & formost.
Yes. And to th OP: There was also a quote from MW's which stated that any option strategy implemented for a long enough period of time will lose money. Their isn't a such thing as a consistent income in options. You need to pay attention to the Greeks and how they fluctuate.
Thanks for the info, I will check these out. I am really appreciative of so many people's willingness to help!