... for a 191.76 debit.
Metrics:
Cost Basis/Break Even: 191.76
Max Profit: 8.24 ($824)
Max Profit ROC %-age: 4.3%
50% of Max: 4.12 ($412)
50 Max ROC %-age: 2.1%
Delta/Theta: 23.45/12.70
Here, selling the -75 delta call against a one lot in one of the higher IV single names (currently at 50.5%) to emulate a 25 delta short put, but with slightly better profit potential and a better break even than selling the same delta'd put outright. Naturally, I wish the underlying was weaker and the IV higher, but you can't have everything ... .
The 25 delta short put at the 205 would bring in 7.25 or so in credit at the moment, with a 197.75 break even. This is relative to the maximum profit potential of the monied covered call with the same delta metrics with a max profit potential of 8.24 (almost $100 more) and an even lower break even some 6.00 below where the short put break even would set up.
Naturally, this only makes sense in a cash secured environment where the buying power effect of the naked 205 short put would be 205 - 7.25 or 197.75 and the monied covered call -- 191.76 (that's 19.8 and 19.2k, respectively). On margin, the buying power effect of the 205 short put would be substantially less, which is basically why you'd stick with the naked short put in the vast majority of instances in a margin account.
As far as trade management is concerned, I'll be looking to take profit at 50% of max and/or look at rolling the short call down intra-expiry (e.g., from the 200 to the 195) or down and out (e.g., from the Jan 200 to the Feb 195) should my break even at 191.76 be tested, thus lowering my break even and reducing my cost basis.
Metrics:
Cost Basis/Break Even: 191.76
Max Profit: 8.24 ($824)
Max Profit ROC %-age: 4.3%
50% of Max: 4.12 ($412)
50 Max ROC %-age: 2.1%
Delta/Theta: 23.45/12.70
Here, selling the -75 delta call against a one lot in one of the higher IV single names (currently at 50.5%) to emulate a 25 delta short put, but with slightly better profit potential and a better break even than selling the same delta'd put outright. Naturally, I wish the underlying was weaker and the IV higher, but you can't have everything ... .
The 25 delta short put at the 205 would bring in 7.25 or so in credit at the moment, with a 197.75 break even. This is relative to the maximum profit potential of the monied covered call with the same delta metrics with a max profit potential of 8.24 (almost $100 more) and an even lower break even some 6.00 below where the short put break even would set up.
Naturally, this only makes sense in a cash secured environment where the buying power effect of the naked 205 short put would be 205 - 7.25 or 197.75 and the monied covered call -- 191.76 (that's 19.8 and 19.2k, respectively). On margin, the buying power effect of the 205 short put would be substantially less, which is basically why you'd stick with the naked short put in the vast majority of instances in a margin account.
As far as trade management is concerned, I'll be looking to take profit at 50% of max and/or look at rolling the short call down intra-expiry (e.g., from the 200 to the 195) or down and out (e.g., from the Jan 200 to the Feb 195) should my break even at 191.76 be tested, thus lowering my break even and reducing my cost basis.
Trade closed manually
Closed at the open for 193.68. 193.68 - 191.76 = 1.92 ($192) profit; 23.3% of max for four days' "work."
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.