Hey option guys, Torontoman's collar consists of a long SPY stock Long SPY March 96 put Short SPY Nov 110 call Why wouldn't he just close the stock and put position and buy a leap? Free up some cash.
Because if spy goes sideways or lower you will lose everything. If you buy a deep in the money leap to thwart this problem, then you aren't really freeing up much cash, you've got theta working against you, volatility could go lower further reducing leap value, and if spy goes down hard you will lose everything.
Even if it's a deep in the money leap? I'm sorry. I don't understand why buying a deep in the money leap is harmful to his position instead of long spy and long march 96 puts. To me it's the same.
This chain got a bit jumbled. Substituting a call LEAP for the stock and the put would free up cash but it would not be an equivalent position. To do that, it would have to be a Mar 96 call.