It may be true if he never played one, ask averybody who has played stock market, can't believe how naive people are. If you buy a stock and price goes down, never recovers, or goes to zero how can you NOT LOSE MONEY ??????????? It happens all the time. You will lose money or all your money or with particular kinds of options or futures YOU CAN LOSE MORE MONEY THAN YOU HAVE IN BROKERADGE ACCONT. Man wake up or bang your head against the wall before you risk your hard earned money playing the game you have no clue.
do you have personal experience with Compoundstockearnings.com? if so give details. i get his emails all the time and he talks a good game. here is a little from this weeks email: CSE Covered Call Fund Results: First Four Months: Based on Internally Generated Net Cash - 5.00% per month for total return of 20.0%, or 60% annualized. This is the return we judge ourselves on. It represents CASH in the bank. Our goal for the Fund is 5% net cash flow per month. We are acheiving 5.00% per month.
A call and put calendar of same-strike and tenor are synthetically equivalent. It's simply doubling up.
If one is short near term straddles, the key phrase is MONTH FROM NOW, if the move down from 40 to 36 takes place AFTER the near-term straddle expires. If the move takes place BEFORE the short-term straddle expires, the long-term long straddle will increase in value, but so will the near-term short straddle. If you are real close to expiration the short-term straddle, the one written, picks up gamma, and therefore delta (greater theta decay means greater gamma). If one is short near-term calls only (and NOT puts) and long a longer-term straddle, then a sharp move from 40 to 36 would be an obvious winner.
no,I meant to compare two strategy: 1.Short call 30 days and long call 60 days 2.Short straddle 30 days and long straddle 60 days. All the above ATM with 1.40 ratio for 60 days in both cases. Close both positions at next exp. So far I played this strategy for four months and made money everytime. A no price change OR sharp price change are the best scenarios for me.
At the risk of repetition... they're the same positions. You're simply doubling the exposure in trading the combo[straddle] time spread... provided the ratio is maintained in both scenarios. The straddle scenario is equivalent to 2*call(or put) time spreads. Same-strike call and put time spreads are locks -- equivalence is achieved, ignoring some very minor exceptions. Dissect the position and the synthetic relationship will become clear.
1.Sell 10 calls 30 days for 1.36 (total=1360) Buy 14 calls 60 days for 1.92(total=2688) at next exp XYZ at 32 , P&L=(-1328) 2.Sell 10 straddles 30 days for 2.72(total=2720) Buy 14 straddles 60 days for 3.84(total=5376) at next exp XYZ at 32: short straddle loss=(-5280) long straddle gain=+5824 Stratedy P&L=544.
For calendars, I prefer to use calls over puts (even though doing it with puts tends to be cheaper), but riskarb is right: you're just doubling up. Either way, you win on a little/no movement, and lose on a lot of movement. Now if the calls that were being sold (1) were at a different strike than the calls that were part of the short straddle (2), that might be a different story (skewed options due to supply and demand). If the calls (and the puts that are part of the straddle) are from the same strike and expiration, then there is no edge. Why not? Calls and puts at the same strike trade at the same implied volatility. If your computer model does not recognize that, then it is using incorrect/stale data. If they traded at different iv's, there would be a risk-free arb. Besides, with just the calls, you are dealing with two b/a spreads and two commissions (short call, long call) ; with straddles you're dealing with four spreads and four commissions (short call, long call, long put, short put). And all for nothing. Why would anyone want to do that?