Discussion in 'Trading' started by polopo, Mar 24, 2002.

  1. polopo


    Reading some earlier posts in this forum, I was thinking of a strategy that I might do. What I want to do is to start out with a delta neutral straddle:
    Buy 3 QQQ Apr02 37 calls @1.4
    Buy 3 QQQ Apr02 37 puts @1.35

    Then wait for the stock to move. If it moves up, then I create my first ratio backspread by selling a call.
    Sell 2 QQQ Apr02 36 call @2.5
    Net debit $325

    Then wait for the stock to move down. Then create my 2nd ratio backspread:
    Sell 2 QQQ Apr02 38 put @2.25
    Net credit $120

    The result is that I have turned a decay sensitive trade into a trade that is negative theta and have a resulting huge straddle with a very narrow loss range.

    I have a PRBS and a CRBS. These combined look like a straddle.

    Question, is this a good or bad idea? Will my broker see the new legs as naked and not allow it?

    The numbers I used were for a near month, but in practice I would probably be 60 days out.

    Of course another idea would be to buy the first straddle with a far month and then as the stock moves, sell the nearer months. This would create two Tspreads.
    what do YOU think ?
  2. polopo


    my friend made that move and got a new 2k

    i dont know why i'm not so sure about it ....