Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW) nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Contact us: support@philstockworld.com
© Copyright - PSW, LLC.
2024
May 29th, 2007 at 10:52 am
Turtle,
In this strategy your concerns over short interest, float, MMs forcing stock one direction or another are mitigated by the hedging inherent in the strategy. If this was a trade heavily biased one direction or another then movements of the stock opposite to a placed trade hurt the position. In this trade I wouldn’t care about any short term manipulation. In fact if the expectation of the stock was to rise but it fell, I would simply target a level at which I would roll the long put down to bank some put profits and similar approach to the one Phil outlined could be employed if the stock rallied.
With respect to volume, put/call ratio I think you it is not as big a concern for you provided the bid-ask spreads are not too wide. For me, anything around $0.10 is fine but over $0.20 it starts to become prohibitive – unless it’s a very high priced stock like a Google where you should expect such spreads.
The key thing to focus on is option premiums and more specifically the cumulative return of short option premiums and how they fare relative to the long options i.e. can you pay off your risk over time and generate handsome profits.
OptionSage