You said: I'm afraid it is a synthetic bull call spread, and alters the greeks that could destroy the original intent of a cc at entry price the CCs greeks are; + delta - gamma - vega + theta at entry price the collars greeks depend where the strikes are and gamma, vega and theta will reverse depending on where the price goes. This is the identical situation of a vertical bull spread with the same strikes. Therefore the collar IS a vertical. This is the definition of a synthetic position. You must agree then, that the collar changes the structure of the trade, depending on where the strikes are situated and may require a different view of stock movement. Much is contingent on where the strikes are. cheers
jrl: Well, I would rather have $100 winners every day than a $10,000 winner once a year--or whenever. Yes, the maximum potential profit for the trade was only $107 after all commissions (without assignment), 1.42 percent for two weeks. The way my record is, I'll take it. Maybe years from now, should I be consistently profitable and dealing in much bigger volumes, I'll not try such a trade. For where I am right now, that's all I should be attempting. Finally this week we closed out two consecutive swing trades with profit: one for $58 and one for $65. Our other two swing trades in progress are up $150 and $225. I danced a jig. FWIW, I looked at my 50 candidates for those closest to the money and weeded down to about 12 candidates, then looked at potential premiums, calculated potential return with commissions figured in, and made my selection from there. I probably made a couple of mistakes in some part of this process. But I'm not going to claim an error in trying to make $100 on a trade. NDG
Another word, you may not use stop loss orders because hitting a stop loss would leave you with a naked short call. :eek: IMO, your broker is unsuitable for a CC strategy.
Sorry Norman....i couldn't get past the statement "my wife and I trade together" :eek: How long are you Married? just kidding...however when my husband and I tried to trade together it was a miserable failure...he finally gave up and let me have the reins and I'm doing much better going it alone. I do have to answer to him when I do something stupid or if our account isn't growing and having to articulate my strategy is a good thing I trade now only in our IRA for income and growth and definitely you need a broker who will allow cash covered puts and all other defined risk strategies. Options give you a wonderful way to hedge and protect as well as help you directionally (once you get a small understanding of volatility and how they affect options). if you are only right 50% i would give up swing trading. I trade a basket of stocks and use options to buy them (sell the put) then sell the straddle etc. but I have followed these stocks for years and know abt when they are at there high/low,,,although my timing isn't great always I have very good patience. When I'm sold out I'll set an alert and when it goes down then I sell the put to hopefully buy the stock. Sometimes its months before it goes anywhere. Selling a CC definds when I want to get out of the stock. If stock goes down then I re-evaluate my opinion on it...fundamentally, technically and macro-economically. if I still believe in it then I will keep the stock and wait for a move up then write another call. If I can not justify holding it or have a better place for my money, I'll sell and take the loss. There are tons of ways to trade...the most important thing in trading is KNOW what type of trader you are and find how different styles and options work for you. If you or your wife really arn't good at picking stocks then you really might want to investigate some neutral strategies on indicies which can make money as long as your only partly wrong. Thinkorswim gives a FREE seminar on "Beyond the Basics" which might be very helpful...check it out. Good Luck and you have my sincere admiration for being able to trade with your spouse!!!!
Norman, Seems like you've gotten a lot of good advice from the board. I trade covered calls, but one of my 1st rules is that I only trade stocks that I wouldn't mind owning. I'm not worried about being too accurate on timing. If I get called out and make my maximum profit, great. If the stock dips and the call expires. No problem, I sell another call. With each call I sell, I'm lowering my cost of ownership of the stock. INFY doesn't look like a good play to me. It had recently gapped down and not filled the gap. It is below its 50 and 200 day moving averages. That being said, it looks like it may be resting on a support line. Why not sell another call? Before you do, make sure you have an exit strategy. It might be a good idea to put a collar on below the support line in case it doesn't hold. For Instance: INFY: 70.32 Sell 1 APR 75 Call 2.10 Buy 1 APR 65 Put 1.60 Results (not including your current loss) Maximum Profit: 5.32 Maximum Loss: 4.68 If the support holds and INFY stays above 70, you will make a profit. If if doesn't hold, you will want to get out either by exercise, or close the position. Better yet. set a stop if the stock falls to 68.5 to close out the position and prevent maximum loss. Consider your current loss to be "Sunk Cost". If you want to hold on because you believe in the stock, play it safe with this type of a position. at least you'll know the risk. Regards, Steve http://www.options-trading-resources.com/EliteTrSig Option trading information and tools the pros wish they had! A former Chicago Mercantile Exchange employee reviews stock option trading software, books, and web sites and online income opportunity.