Cost of insurance using options

Discussion in 'Options' started by Neutral, Dec 13, 2011.

  1. naked puts much more dangerous, when the weather gets nasty, you catch cold.
     
    #11     Dec 19, 2011
  2. It certainly makes sense to buy the "synthetic call" on shares you intend to own for the long-term. Low vol-decile, macro-risk, vol-ramp into earnings, etc.

    Otherwise you're better off simply buying the call or put outright. There is some holding risk on rates when contrasting a natural and synthetic, but that's beyond what we're discussing here.
     
    #12     Dec 19, 2011
  3. spindr0

    spindr0

    atticus, do you have any links for dispersion related info that doesn't require a PHD to comprehend? Something a meat and poatoes trader could comprehend? :) Thx
     
    #13     Dec 19, 2011
  4. newwurldmn

    newwurldmn

    A long call vs a synthetic call will have different tax implications if the option expires worthless. A long call becomes a capital loss and in the synthetic call, the put becomes added to your cost basis and you can maintain the shape of your underlying tax status (long term perhaps).
     
    #14     Dec 19, 2011