(10-23-2013, 06:14 AM)tarulestheday Wrote: Optionray: question from delt1970 on IV: Is he long or short the Puts and Calls and is the 40 and 60 the strike he has chosen or the number of contracts he as executed for each? I'm sure he has tried to be helpful with his post, and I respect his opinion and technique, but the post is incomplete and not helpful unless he expands upon it.
I bought 30 of the puts, and 20 of the calls yesterday.
I will sell the puts or lighten up on the puts after the 31st of March, or sooner if there is a significant dip after the 22nd of November (32 days after purchasing - wash sale rules). Which in effect, will lower my basis on the calls I bought. From there, I will be more heavily weighted on the call side through the remainder of the 2014.
Also, note the cost of the puts was $5.00 and the cost of the calls was $16.00, which in itself is more biased to the long side, so in the event there is a year end run up, I've paid a little insurance and haven't really missed out on the move. Also note, I have an additional 20 calls of the 1/17/2015 50 calls that I am hanging on to for the next 32-70 days which will be sold prior to the 31st of December, so In effect, I am really sitting on 30 of the puts and 40 calls until the 31st of December.
Also, one other note, when you look at the total value of the puts, should there be a catastrophic collapse in share price, it pretty much covers the value of the investment in calls, so I always remain in the game. The reason for the March 31st date I referenced.