I can't believe all this discussion over a simple synthetic call. Anyone advocating a simultaneous trade in the stock and put shouldn't be listened to.
Re: starting flat on the ticker smartoptionsreport.com says for a straddle "ideally, you want both the put and the call to be right at-the-money or one of the options to be only slightly in-the-money". For a strangle you buy the out-of-the-money strike prices. I take it legging in, above or below the strike price(s), is always preferred? Re: 4 puts to allow for PnL symmetry It took me a while to get this but now that I've seen some P&L graphs it makes sense. Synthetic long call definition, including P&L chart: http://www.voptions.com/bullish_strategies_synthetic_long_call.htm Thanks again for the replies. Stoxtrader
BWBs are essentially ratio spreads with far tails. Learn the fundamentals of ratio spreading before trying.
JJ90 as you may know there is very little material on BWBs and ratio spreading. This subject really doesn't belong here since it has nothing to do with what the newbie thought he was looking for. Don't know why daddy's boy popped up with it. The BWB strategy needs to have its own elitetrader thread. Maybe you and db would participate? I said search Yahoo groups not finance. http://groups.yahoo.com/ To make it easier, here is a link to the group http://finance.groups.yahoo.com/group/Option_BWBs_and_Collars/
Yeah, someone (don't recall who) mentioned BWBs a few weeks ago on another thread. I searched a around a bit and didn't find much. I'll start a new thread and call it something like "BWB questions".
Can someone tell me how to accomplish the following without using a synthetic call? Buy AAPL @ 76.98 and buy the Jan 08 100 put for 25.80 = total 102.78. The most you can lose is 2.78 between now and Jan 08. Then you start writing covered calls. You can get 2.05 for an Oct 80, or maybe go out to Jan 07 and get 5.80. If the stock stays below 80 your calls expire and you write again. If the stock goes up you maybe roll the short calls up and out or get called and sell the long put. If it goes up a lot you sell the stock and long put and buy back the short. If the synthetic call is identical to long stock and long put then this would be the same as a calendar spread. But a calendar has a sweet spot right around the original strike price. In this case the stock can drop to zero and you still won't lose.
Long stock and long 100 put is synthetic 100 call. Given that the stock is at 76.98 right now, this would be an OTM call. If you short a shorter-term 80 call then you would create a diagonal spread and your sweet spot would be at the short call's strike. By the way, the most you can lose is 2.78+cost of carry on the stock, which works out to be about 5.32, so that's 8.1