15 lines
1.1 KiB
Plaintext
15 lines
1.1 KiB
Plaintext
Chapter 23: Spreads Combining Calls and l'uts 357
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Looking at the negative side, the "calendar straddle" is the least attractive of the
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three strategies, primarily because one is forced to increase his risk after near-term
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expiration, if he wants to continue to hold the longer-term options. It is often diffi
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cult to find a "diagonal butterfly" that offers enough credit to make the position
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attractive. Finally, the "calendar combination" has the largest probability oflosing the
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entire debit eventually, because one may find that the longer-term options expire
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worthless also. (They are out-of-the-money to begin with, just as the near-term
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options were.)
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The strategist will not normally be able to find a large number of these positions
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available at attractive price levels at any particular time in the market. However, since
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they are attractive strategies with little or no margin collateral requirements, the
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strategist should constantly be looking for these types of positions. A certain amount
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of cash or collateral should be reserved for the specific purpose of utilizing it for
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these types of positions - perhaps 15 to 20% of one's dollars. |