collars Look-backs knock-ins/knock-outs 1-touch/2-touch no-touch window barriers tunnels caps floors ratchet caps sticky/flexi caps choosers Binaries shouts callable power reverse duals Spread TARNS range accruals cumulative inverse floaters callable snow range laddered inverse floater thunderballs Snowblades callable spread range with snowball
From a poster on 'optionsxpress.com' discussion board: "The "Tarzan Loves Jane" or "TLJ" is an Optionetics label for a double diagonal ratio spread. The idea is that you have a trade that has an unlimited upside profit potential, an unlimited downside profit potential, and a profit zone between the two. You'll need to play with this on a risk graph to get the idea. Generally, you will want to buy a number of longer term call options and a number of longer longer term put option. For example, let's say five of each. This essentially gives you a strangle. The next step is to sell a fewer number of front month calls and puts. For example, assume you sell three calls and three puts. The more rapid theta decay of the short front month options gives you a positive theta. Your trade earns money from the passage of time. Your trade, when initialy put on, is delta neutral. This means that the money lost on the long put from an upside move is offset by the money gained on the call side, and vice versa. Each month you sell new short, front month calls and puts. Your goal is to profit from theta decay; i.e., premium collection. The ratioed longs give you a profit if there is a big directional "pop" in the underlying's price. Where people get in trouble with this trade is they fail to understand the role of implied volatilitiy. This is a vega sensitive trade. An increase in IV will push the risk graph higher and create additional profits. A drop in IV will see the risk graph fall, creating a loss in the trade no matter what happens. If you miscalculate IV on a TLJ, a.k.a., double diagonal ratio spread, you're bound to lose money. If you open the spread in low IV conditions, it can be a nice, non-directional play. Just make sure you understand what you're playing with." daddy's boy
Thanks for the clarification, I did not think you would buy a deep ITM put Must have been a typo in the previous post. Right now a TLJ looks very promsingin on GOOG if you use DEC for the short and go out past JAN.
For further reference to TLJs, check out http://stockoftheday.blogspot.com He posts on another forum too, one which you know of coach. I just hope he doesn't mind me showing his site here. You guys know how things get......
mb has left to ascend mountain to seek answer. Will return in 3 more years after consultation with guru.
OOPS!! :eek: Yes it should read; in oct stock @ 81.xx sell 3 jan 60 puts buy 5 apr 62.5 puts sell 3 jan 120 calls buy 5 apr 120 CALLS BTW Optiongear has a scan for tlj spreads. & Hey the view from the mountain is great! OK, Back to meditation @ the monastery!
on the start page, strategy wizard, advanced, tlj backspread - just testing at the mo, but it seems to produce several andidates for further analysis - yet to follow the end results.