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Post by nagrani on Dec 16, 2014 18:38:25 GMT -8
Apple down 6 days in a row. Is that a record???
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Post by archibaldtuttle on Dec 16, 2014 21:35:44 GMT -8
Not sure about days, but we haven't had three down *weeks* like this in a row since the great decline of 2012-2013 ended. So either we see a big bounce in the next three days, or we are in new territory.
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bud777
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Posts: 1,354
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Post by bud777 on Dec 17, 2014 0:14:53 GMT -8
I think the worst case scenario for this is when we are near the strike price and have a sudden drop. Say the strike is at 100, we close at 102 and the next day we open at 85 because the government announced after hours that cell phones cause brain cancer. I would have to sell the shares at 85 and buy them at 100. The sale of the puts would offset some of the loss, but it would still be a loss. One of the reasons that I can think doing this is that I could survive the loss without going bankrupt or losing my home. But you are right, there is some exposure. I was thinking about doing this with OTM puts, with the strike price about 20 points below the current closing price when I do it. I am also looking at how it would work with ATM and deep ITM puts. Thanks for thinking about it There is just something about this ledge that draws me out here
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mark
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Posts: 1,574
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Post by mark on Dec 17, 2014 5:54:25 GMT -8
I think the worst case scenario for this is when we are near the strike price and have a sudden drop. Say the strike is at 100, we close at 102 and the next day we open at 85 because the government announced after hours that cell phones cause brain cancer. I would have to sell the shares at 85 and buy them at 100. The sale of the puts would offset some of the loss, but it would still be a loss. One of the reasons that I can think doing this is that I could survive the loss without going bankrupt or losing my home. But you are right, there is some exposure. I was thinking about doing this with OTM puts, with the strike price about 20 points below the current closing price when I do it. I am also looking at how it would work with ATM and deep ITM puts. Thanks for thinking about it There is just something about this ledge that draws me out here What if the stock drops to 99.5 and you sell it, then it languishes there for a few days and after earnings are announced (or some other event) it pops right up to 115-120?
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bud777
fire starter
Posts: 1,354
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Post by bud777 on Dec 17, 2014 6:06:07 GMT -8
That certainly could happen, and could happen more than once. If the moves are overnight and I cannot get back in in time, I would have to hope that the proceeds from the puts would be greater than the gap up. I guess that if this were entirely risk free, everyone would be doing it. I have to get Level 4 authorization to effectively sell naked puts, so I have a little more time to consider this.
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Post by rickag on Dec 17, 2014 11:17:51 GMT -8
That certainly could happen, and could happen more than once. If the moves are overnight and I cannot get back in in time, I would have to hope that the proceeds from the puts would be greater than the gap up. I guess that if this were entirely risk free, everyone would be doing it. I have to get Level 4 authorization to effectively sell naked puts, so I have a little more time to consider this. Just my 2ยข Selling puts near all time highs seems dangerous. Buying calls near all time highs seems dangerous. Buying puts near all time highs maybe safer or selling calls maybe safer. But this is a monster quarter so I am frozen, can't think logically. (Note: my track record with options is embarrassly bad.)
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