Strategy

Start deducting pts. We're heading for page 6

 

took the whole shabangle of the table
except the short fut

 

i can feel the love in the room

 

So i shorted 100 IWM
shorted 1 sep 70 put
bought 100 dia
and sold 1 sep 125 call

 

Back to square one, huh!?

Why do you insist on making two trades instead of one?

 

to try and stay market neutral overnight

 

and because i'm stubborn

 

It's not about being market neutral.

Instead of shorting 100 IWM and 1 sep 70 put, you could've just shorted 1 sep 70 call and have the same exposure. Also, instead of buying 100 DIA and shorting 1 sep 125 call, you could've just shorted 1 sep 125 put.

Why make 4 trades and pay 4 commissions and slippage, when you can make 2 trades to achieve the same position!?

 

i would never short a put without the underlying

 

It's convertible. Shorting the underlying and the put is synthetically equivalent to selling the call (same strike) outright.

I am selling the 170P when I go long 100 IBM and sell the 170C. The difference between the two positions is the conversion arbitrage. I realize you're stubborn, but it's more important that you "get it" then concern yourself with the additional $10 in commission and slip.

You are short a naked put when you buy XYZ and sell a call.