What to make of this strategy?

Unbundled with equites can save a chunk on commish, particularly if you add liquidity. Does unbundling apply to options as well?

 

Do you always go atleast one whole strike OTM?

What ifs stocks att 55.3 and the call is at strike 55, the most premium would then be att 55 naturally.

 

They offer discounts on a volume basis, but you don't opt-in. Below 10k/month it's $0.70 per contract on prems > $0.10.

 

The worst case scenerio for this strategy is:

let say you get assigned for your short put (take delivery) for QQQ at $50.

You immediately write a call at $50 and take in a premuium of (let say) = $1.

And you know what, QQQ jump to $60 in the expiration month and now you are lossing $9 (QQQ been called away at $50 and you only get a premium of $1 for $50call, $60-$50-$1 = $9 LOSS).

If you go for 10 contracts, you are losing $9000.

This strategy is the biggest loser in the super GAP UP/Bull market and NOT in the down market.

Interesting, right ?

I would rather use a calendar than a stock to hedge the short call or put.

 

Has anyone backtested this idea? Man if i only had data.

 

That's an opportunity loss. In reality, you made $1,000 from the covered call plus the original short put premium.

Your math on the CC should be $50- $50 + $1 = $1 gain

If you legged out at parity it would be $60 - $50 -$10 + $1 = $1 gain

 

BTW, that was directed at HoCo who seems to have abandoned his thread.

 

Do you actually trade on Cohen's strategy? I read the book about 5 years ago but got sidetracked and never implemented it. Also, I can't seem to find anything current about him on the Web.

 

Not abandoned, just in read mode learning all I can. Dr. Joe's post is what inspired me to ask those with wider experience.

 

Iam also willing to help out and try this direction.