Another strategy if you are expecting more downside in your
position, is to write some covered puts/calls. Let's take the
current trade for example. SPY is currently trading at 134.11. You
can short the SPY MAY 13 135 Calls(out-of-the-money Calls) at 0.32.
As long as the SPY settles(closes) below 135 on expiration(May 13),
then the options expire worthless and you pocket the premium. If
you are expecting to take further heat in your current position,
this strategy generates a steady stream of cash in the mean
time.
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Another strategy if you are
Buy Sell Discussion
Posted by cw12 on 11th of May 2011 at 03:04 pm
Another strategy if you are expecting more downside in your position, is to write some covered puts/calls. Let's take the current trade for example. SPY is currently trading at 134.11. You can short the SPY MAY 13 135 Calls(out-of-the-money Calls) at 0.32. As long as the SPY settles(closes) below 135 on expiration(May 13), then the options expire worthless and you pocket the premium. If you are expecting to take further heat in your current position, this strategy generates a steady stream of cash in the mean time.