Originally Posted by
Buck Rogers
Always good for a discussion. I would look at doing this on a stand alone basis as a strangle(you are correct about the theoretical unlimited loss on the upside) Pretty low volume. A mitigating factor is, I bought RMO towards the close on Thursday after a PITA selling of RMO in Fidelity after the name change on Wed from RMG to RMO at 31. Had to call a broker at Fidelity because they didn’t handle the conversion as seamlessly as I would have wished. Nonetheless, it would be effectively a covered call with the naked put as you suggested. I opened a TT account and instead of paper trading( a good recc ) I have made some differing trades (IC, butterfly, strangle, vertical) to learn(no pain, no gain). Spent 1 day waiting on a fill, had to adjust the bid the next day to get filled. I suspect on a low volume stock like RMO that might also be a factor.
I have used the “duplicate me” of several TT traders but was wondering about my own pick. Seems the metrics are as good or better than a strangle from the pro’s at TT. I was tilting towards the strangle due to my long RMO stock but would have considered it on its own merits as well as what you are thinking. Since I am a Boomer and am well acquainted with all the “missionary positions” of options, I was interested in some of the “bark like a dog” or “pretzel positions”.
Signed,
An old dog trying to learn new tricks
Buck Rogers RMO isn’t terribly illiquid so it seems tradeable. Consider a February spread; its close to 45 days to expiration (Tasty trade target). I just plugged in the following February trade; sell the $20 put and buy the $15 put. This gets you, roughly, a $2.50 credit. So max loss is $2.50 (width of spread is $5 (20-15)) and max loss is width of spread minus credit collected (5-2.5). So let’s assume the stock tanks to $5, you give back the $2.50 you collected plus another $2.50. The probability of 50% profit on this is 66% (also a tasty trade target).
I like this trade. I’d put an order to sell the spread for $2.50 and if it executed put in a GTC to close it at 50% profit. (STC For $1.25...GTC).