We’ve been very fortunate to have had a decent market to trade this summer. Individual stocks moved a tremendous amount the last few months, and offered up some pretty significant opportunities along the way. I don’t recall a summer over the last 5 years being as profitable as this one has been, but that might be independent to me.
As I mentioned a shift in focus over the next couple weeks to a certain type of stock, I want to quickly address a strategy that would work well in this current environment, and that is diagonal spreads.
This strategy will work for those of you sitting on longer dated calls that are stagnant, or slowly decaying in value. Treat them like a covered call and sell a shorter dated (preferably front month or weekly upside call) against the long call you already own. This will put a credit to your account that you will realize at expiration. For longer dated options and stocks that have hit a flat spell, it’s a great way to offset premium decay and still have a directional bias on the underlying stock.
In the short term, the risk is limiting upside. However, if you are confident the stock isn’t going to move any time soon, you might as well lower your basis by legging into a diagonal spread.
OA
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This summer has certainly been great for me as well.
The Fly has hired a thug to run his site..
A thug? How so?
You are still pissed over a chart I posted? Jeez, you miserable fuck.
which chart?
This post: http://ibankcoin.com/option_addict/2013/08/07/my-sentiment-is-gold/
This Sierra Water asshole comes out guns blazing about my faith in the western banking system. It was a hilarious exchange.
In reality, he feels pointed at based on my comments about Gold traders trapped at horrible prices. Triggered a raw nerve.
Probably the same tool going by many many names
Why don’t you show some class?
Youv’e got to be kidding, like your statement showed class?
Sierra
Cut it out.
Off topic comment-
At first I thought sometimes I feel like Schrödinger’s Cat- alive yet dead. trite one liner, sorry.
Then it occurred to me it could be a metaphor for many things in life.. when the box is opened, reality is there.
Ultimately though, the cat thought experiment was a grand way to tell the “Copenhagen Interpretation” folks that they really are stupid morons.
Then you can tell them you will “quantum leap” across the universe and hit them faster than a supercollider, and kick them in their “double slit”
Ha,