Stocks & Commodities V. 30:9 (51): Explore Your Options by Tom Gentile
Product Description
Explore Your Options by Tom Gentile
MARRIED TO A CALENDAR?
I’ve read about getting into married put and collar positions using short puts. I also realize you can cut down risk if assigned by selling a bull put spread instead. What about using a long put calendar to enter into a married put?
Using a long put calendar or time spread can certainly allow a trader to establish a married put if the front short contract is assigned; however, there can at times be advantages to approaching a married put with this strategy. As with the bull put spread, not only are you in a limited risk position, but upon assignment the married put is in place as the long stock is already hedged with the back-month put.
Conversely, the holder of a vertical that receives assignment on the put may need or want to go back into the option market to redesign his or her married put, as they don’t have a longer-dated contract to guard the new long stock holdings. This trader only maintains protection into expiration which, if exercised, will result in a closing of shares for a loss equivalent to the strike distance of the vertical minus the initial credit.
MARRIED TO A CALENDAR?
I’ve read about getting into married put and collar positions using short puts. I also realize you can cut down risk if assigned by selling a bull put spread instead. What about using a long put calendar to enter into a married put?
Using a long put calendar or time spread can certainly allow a trader to establish a married put if the front short contract is assigned; however, there can at times be advantages to approaching a married put with this strategy. As with the bull put spread, not only are you in a limited risk position, but upon assignment the married put is in place as the long stock is already hedged with the back-month put.
Conversely, the holder of a vertical that receives assignment on the put may need or want to go back into the option market to redesign his or her married put, as they don’t have a longer-dated contract to guard the new long stock holdings. This trader only maintains protection into expiration which, if exercised, will result in a closing of shares for a loss equivalent to the strike distance of the vertical minus the initial credit.
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