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I was wondering if have you considering the following solution ; leave a pending order in the underlying in the opposite direction at the strike price.
Example : You short a put with strike X (far below the market). So you then leave a short stop in the underlying at X.
If the market tanks the the underlying short should cover losses, though I suppose the margin on the short could be a big problem. But at least you have protection and the protection costs nothing to implement. The main risk is it touchs your strike and the moves back up, in which case you have complexity of managing 2 positions...
let me know your thoughts or whether you have considered / tried this.
This is my idea of a cheap form of insurance, cheaper than a spread, so you dont loose bank on a major fluctation....
Just one sentence regarding margin, when using your concept: Margin should be approximately the same if you add a short future to your ATM short put. With and without this future your delta is approx. 0.5 or - 0.5, respectively.
Does your spreadsheet, version 05a, allow for a spread with 3 options...
I'm trying to add a small tail hedge to the spread and see how that reacts. So far adding a 3rd contract simply results in the spreadsheet throwing up and me getting blank results.
esh6p1700 -1
esh6p1450 2
ewf6p1000 1
I'm playing around with that last one...I've tried
esh6p1000 also but that got me the same blank results. Any help would be most appreciated.
I use DeCarley Trading, and I am very happy with their service. And, to a smaller degree, IAB. (I have my stocks account at IAB and use some of the free margin for option selling. But I would not recommend them for a trader selling options.)
I'm at Futuresonline.com They are the discount division of Daniels trading. I've had an account for 2.5 years and so far they've been the best out of about 7 brokerages I've used since 1998. I've had a couple easily solved glitches but overall would highly recommend them. The only downside for me is there are no T-bills available which may become a problem now that the interest rate on them are going up.
The worst was Tradestation. I left in 2015 and during the last 2 months there I had literally upwards of 100 phone calls and e-mails with them dealing with all manner of mistakes they made. The customer service reps were extremely difficult and moronic. I had to switch broker reps multiple times and the last one confided in me that Tradestation is not all that suitable for option sellers. While their futures platform is award winning, their futures options platform was horrible. Overall a nightmare experience that I could write a giant post on.