Wednesday, August 29, 2001 after the close.
Dow 10,090.90 -131.13 -1.3%
Nasdaq 1,843.17 -21.81 -1.2%
S&P 500 1,148.56 -30.65 -2.6%
QCOM 62.72 -0.08 -0.13%
Took a risky move. Sold 10 Jan02/65 put on qcom (aaomm) at $10.20, collecting $ 10,200 premium. Then immediately bought 100 shares of QCOM at 62.25. (Don't we want more shares of qcom paid by those premium?). Now the covered strangle strategy has the holdings as follows:
1,100 shares of QCOM plus $ 61,625 cash. The cash is as follows:
$ 57,650 (see post # 17) + $ 10,200 - $ 6,225 = $ 61,625.
If assigned, then I am short of $ 3,375.
This is a risky move. First we do not know where the market is heading, and second we are selling put before selling the call, which means that the downside protection is less (compare that if we have sold the call first). Nevertheless, I am in the camp where I think the market is movinf sideways plus minus 8% of nasdaq 2000, and now we are at the lower range of nasdaq.
What about 100% cash/short put. For comparison we must make a pseudo trade as well. in this situation we have
$ 121,400 in cash, so we should have sold 19 contracts of Jan02/65 puts at $ 10.20 and should receive $ 19,380. Therefore, total cash is $ 121,400 + $ 19,380 = $ 149,780.
No action taken to the other 3 strategies.
Summary
a. 100% cash : $ 110,000 value: $ 110,000 - no change
b. 100% cash/short put : $ 149,780 and 19 short puts Jan02/65
c. covered strangle : 1,100 shares of qcom plus $ 61,625 and 10 short puts Jan02/65
d. buy/write : 1,800 sh of qcom plus $ 5,510 - no change
e. buy and hold : 1,767 sh of qcom plus $ 4.25 - no change |
