OK, that makes more sense. I think I figured out what he meant by riskless system. He sells a strangle that is skewed to the call side thus making the downside move completely protected. So the stock could have fallen to zero and he still wouldn't have got hurt. He was safe between 0 and 70 for a $35 stock. Assuming a 50/50 chance for the move, that is not bad. Of course this system isn't riskless, and above 70 the Big Hurt would have started, but it is an interesting concept...
Exactly.. not riskless.. But he meant a costless collar, which is not what he traded... and a costless collar isn't riskless either. Therefore I stand by my observation of Marsman's stupidity....
This is where we lose out by having people like Marsman banned : we could have grilled him and found out much sooner what were the basis of his 'stupidity'. In sumary where is he at now: just on demo? still with a backer ?
Challenge accepted!!! It took me 2 seconds to blow this to pieces... I will not say anything yet, so you guys, @Pekelo @vanzandt @smallStops can figure the stupidity of this "riskless strategy" out....
I can't figure out anything JR.... I just hope Marsman makes it. Why? Hell I dunno. Maybe he'll help a refugee. A single point of light. Us here....We're all blessed. You go Mars.
Yeah I figured it out, he didn't buy and sell at the same time, but bought the cheap calls first, then when IV increased sold the same strike dif. exp. calls. He explained it though: " it has to be constructed time-sequentially, ie. the short is opened later when the volatility (that's primarily the IV) is higher..." But it looks like he only locked in a 1% gain in 6 months (if it is a CC and he has the stock). If the stock goes down, that is his only gain. If the stock goes up but the IV collapses, he still get a loss although not a big one, assuming he is trying to close the positions at the same time. The bought side always should have more value, because it has a longer expiry. If he wants to time the closing of the positions, he is going to have a risk of the stock dropping once he closed the short side, thus his bought calls will lose value. So I just don't see the big return on this position, and timing is involved at both the opening and closing of the position. And as we know, timing is everything...
@Pekelo exactly. It's not a riskless strategy when you have to wait untill IV is high enough to sell something else on your initial position. Also, I assume he would sell the 180 day call first... and than has to wait untill the 210 day call is valued lower than the 180 call... which is dumb, since at no point in time the longer term call will be priced lower than the shorter term 180 day call... If the longer dated call drops below the price where he sold the shorter dated, he might as well buy back the shorter dated call, since that will trade even lower... and be flat in position.... So, not riskless... never going to be riskless at position opening.... will always be a risk untill close out or the buying of longer dated as a hedge...
Tweetathon going on in Marsmanland. Apparently JR and Pek... you two are missing something... the language barrier makes it tough to figure out.
No, we're not missing anything... it's not about the closing of the position. He assumes he can set the two legs up without any risk... The risk is in opening 1 leg and then having to wait to open the other as a hedge... which might take hours, probably days... or even never ever... So no language barrier issues, unless you are referring to the language of ignorance... Just face it @vanzandt , when are you pulling the plug on your long bet on Marsman? Just give up and cut the loss already...