IC, if all goes according to plan,hes short the synthetic put with 10 points of upside on the stock and 41.95 in premium from the initial sale of the call..He can make decent money,the question is can he take a 3500 hickey and execute his plan. What makes little sense to me is being short a .35 delta call at 750,and doing a U turn at 830 and turning the short call into a short 840 put with an apx 55 delta.. Be curious to know where he covers the call if profitable
Obviously new to this. Thank you for your patience. I am bearish. I really just want to short sell the call. Make the premium. Don`t want to own the stock. (buying puts seem too expensive) I am way over simplifying the risks as I really have no idea about the greeks. If the stock goes up and I buy the option to close I will lose money. I can hold on to the short naked call and hope to stay under the strike price. I am starting to see the biggest risk is buying the stock next week at 830 (to cover getting exercised) and then having the stock drop a lot. 30% drop would be about $20000 loss. Would be worse if next week it gapped up bought at 900 then tanks. I see there is large potential downside. On a good note I made $234 (after commission and exchange rate) on a put I sold to close today. apr6 CZRp bought at .25 sold at .54 Learned that my canadian broker takes 2% on exchange rates so I lost 4% of the profit after buying and selling
Other than a big gap up,you have identified you biggest risk. My question to you is why do you feel the need to buy 100 shares of stock at 830?? Seems a little aggressive Why not 50? What's the max pain you can take?
One other problem, besides the gap up, is that you purchase at 830 and it then goes down from there. It will happen some significant percentage of times. So trying to avoid the downside by not owning the stock has limited applicability. It will work sometimes, of course. By trying to limit the downside, you also limit the potential upside if you had purchased when you wrote the option.