Martinghoul
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No worries... Glad I could be of help.
scose-no-doubt
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oh ok. I was confuseded cos all the books settle with the underlying. Makes sense too as there's no expiry to the close if ya get me.
calls should be fungible against puts in theory though right?
calls should be fungible against puts in theory though right?
Martinghoul
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I don't get you, amico... You iz confusing me.
And no, calls aren't fungible against puts, unless we define put-call parity as a form of "fungibility". However, as I keep saying, even with put-call parity, if you've ever had a conversion expire smack on the strike, you know that there are certain practical considerations that need to be taken into account.
Safvan, 1 way to avoid getting DITM is to "walk up the option ladder".
If you buy a 100 strike call when the stock is at 100, and then the stock moves to 106, you can sell the 100 call and bank the 6 dollars increase, and then buy the 105 strike, later selling that one when the stock is at 111, and so on up.
This is clever because you only have the ATM premium as your maximum risk (if that particular option goes to zero), and all the way up to 250 you're taking the profit out of the market and banking it.
This is why options are so much better than buying stock. With stock you can only take the profit by selling, and then you're out of the market and miss any subsequent further stock price move up.
With options you only have the At-the-money option premium at risk at any one time, and you can bank the profits as you go, and you stay in the market by buying the next strike up's Call option.
If you buy a 100 strike call when the stock is at 100, and then the stock moves to 106, you can sell the 100 call and bank the 6 dollars increase, and then buy the 105 strike, later selling that one when the stock is at 111, and so on up.
This is clever because you only have the ATM premium as your maximum risk (if that particular option goes to zero), and all the way up to 250 you're taking the profit out of the market and banking it.
This is why options are so much better than buying stock. With stock you can only take the profit by selling, and then you're out of the market and miss any subsequent further stock price move up.
With options you only have the At-the-money option premium at risk at any one time, and you can bank the profits as you go, and you stay in the market by buying the next strike up's Call option.
The hidden problem in this strategy is that you have to pay for the maximum time value of the option every time you buy a new one (as the ATM options contain the max TV)... maybe it would be better to use slightly OTM options and use strangles to climb up/down the both sides...
