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| If you buy a "close" to the $ call and sell a "deep" out of the $ call you can recoup some of the extra time value that you are paying for the call you buy. The position doesn't open you up to massive margin calls, just limits your upside potential.
For example, Sold $4.50 CZ10 then you go buy a $4.60 dec 10 call for ~56cents and sell a $5.40 dec 10 call for ~33 cents. Your net cost is 23 cents to own the $4.60 call, but your gain will be limited to 80cents(540-460). Very breif explanation, but I have learned that selling options is a great way to reduce the "time value" associated w/ deffered call options(or put options).
Remember, your broker should be able to help you on this AND MAKE SURE YOU UNDERSTAND THE POTENTIAL RISKS BEFORE AGREEING TO TAKE THE POSITION.
hope it helps!
for what its worth, I am not currently interested in "protecting" cash sales/hedges. | |
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Option adv ice
