What are your thoughts on married puts and calls?

[Reaver 10]

Tin, Torero, if you think this would be better suited to the options discussion thread, feel free to move.....I just didn't want the nice thread to turn into a tangent on my part. Married puts and calls sound good in theory, but we know how that usually goes....

 

Do you think they are a good idea? I knmow almost nothing about options, so I definitely appreciate any input. Thanks!:p

[TinGull 10]

Sorry I didn't see this one!! When you say "married puts and calls" are you talking about buying both of them for one as a hedge? I mean...that is a strategy but not a very lucrative one from my standpoint. I think, the best option strategy is selling spreads. For instance, in an uptrend where you might normally buy a call outright...give yourself a little safety and sell a put spread. That way, you've got downside protection and an upside potential as well. The upside is capped, however, but the downside isn't gonna hurt as bad if the whole thing breaks the uptrend line.

 

For instance...one of my horrific trades in October...I had some calls that I had sold on SPX and RUT. Market was awfully overbought, and I figured it was time for it to rest. Well...this was my biggest lesson in trading...trade what you see, not what you think. So...I sold some bear call spreads and then it just went up, and up, and up....and up some more. Intense to see money drained from your account. BUT...had I just bought puts on that thinking it was going to go down...I'd be out much more money than I was.

 

For more reading on option spreads, check out redoption.com and optionplanet.com. Both of those have TONS of information for you to dive into. I figure that once I get a sufficient bounty from mini trading, I'll go to selling way far out of the money spreads so I only really trade once or twice a month. It'll give me a steady monthly income without having to be at the computer all day long.

[Reaver 10]

Yeah good point Tin. I read about the strategy, and it doesn't seem to make a whole lot of sense to me...I just wanted to see what you thought about it. Thanks man! Best of luck!

[TinGull 10]

Thanks! Let me know if you've got other Qs and I'll do my best to help

[wsam29 10]

married puts is the same as a covered call, but instead of long stock, you are short stock, long put option for upside protection.

 

long straddle/strangle...that is when you long both puts and calls, but not knowing which way the price will break. The only difference in a straddle are the same strike prices and a stangle are two different prices.

 

If you consider doing this type of play, I suggest going long the spread 2-3 weeks before the expected annoucement because of that old adage, buy the rumor, sell the fact.

 

The reason, the general public does not think about the earnings report until 1 week before to the day before because this is a sure way to make a quick buck, long calls and puts, the secret formula to riches!!!

 

Market markers know that and they will jack up the volatiliy of the spread to the point where it just gets crushed on the day of the report.

 

I'm not an expert at this but have taken some courses for educational purposes, well turned into education.