Hi All, First post here. I had a question about the feasibility of a vanilla strategy. Would a Bear Call Spread + Long stock be a decent short term strategy. Lets say 14-42 DTE. Goal is to try and grab a few extra bips within an expected move, while still having upside for large moves. Essentially trying to grab the premium out of a covered call while still being bullish and keeping upside. Take MSFT Feb 14 Exp. Current price 425.8 Short call 445 for $5.15 (Delta = .292) Long call 455 for $2.96 I understand that once MSFT crosses 445(+prem) I underperform, but would this strategy win more than it loses? Would love some thoughts on if this is a decent strategy, what pitfalls it has, and what other ways there are to implement something like this. thanks
Sorry what? I'm not talking about a collar in this. I'm not purchasing a put to limit downside, i'm selling a call above purchase price, and buying a call above that. Trying to grab extra yield within an expected move.
you're long underlying and short a call vertical? isn't that the same profile as a risk reversal (short put, long call)? why not just do a covered call?
Long stock - 90C = short the synthetic 90P. Short synthetic 90P + 100C = 90P/100C bull risk reversal.
Hi VOLdemort and 2rosy, I really appreciate you both taking the time to respond to my question, and see how a risk reversal is equivalent payoff wise, and is more efficient from a capital perspective, so thank you. To answer why not just do a CC. My situation is unique in the sense that I must own the underlying, but I don’t necessarily want to give up all the upside. Say I own SPY, want to have a better than market return up to 3% in the month, will forego 3-5% in a month, but if it shoots past 5% i’d like to continue participating.