siffoin
Footballguy
No! Just like a person long stock I actually have $14 of risk (total risk = $14 x 200 shares = $2800)...that's if UNG goes to $0.00. I'm long calls, AND short puts...so if UNG goes down...the long calls lose their value while the short puts gain in value. My bet is just the opposite...I hope UNG rises in value and the long calls go up in value while the short puts lose value. If on Jan expiration UNG is at 21...the 14 call will be worth $7.00...and the 14 puts will be worthless.Basically Synthetic Stock is dollar for dollar just like going long stock. If UNG goes up $1.00 I make $1.00. If it goes down $1.00 I lose $1.00. The only difference is that the Synthetic Stock has an "end date"...Jan 2010. Where long stock can be held forever. The cost for me to enter this is significantly less than going long stock. Going long 200 shares would have cost $2800...in the synthetic stock play the cost for those 200 shares was only $50. If UNG goes to $21...the person who is long stock at $14 would make $1400...a profit of 50%. Dang good. In this case I'd also make $1400, but % wise my gain would be 2800%...much better.Can I close this position out at anytime? Yes. To do that I would sell the calls and buy the puts. Because the play is at the same strike premium burn (time decay) will be close to the same for both the puts and calls moving forward. The gain/loss from this point forward (till Jan 2010) is $ for $. Meaning if UNG goes to 16 tomorrow my gain is $2.00 x 200 shares or $400...and I could close the position with that gain at my discretion.So you are only risking $50 on 200 shares of UNG but in order to make $ UNG has to get to some level (strike price?) before some date or you lose the $50. Do I have that right? You can also sell the contracts to someone else before the options expiration date, right?siffoin said:Well I got filled on 2 (out of 10 contracts) on the UNG synthetic stock @$.25. Essentially long UNG 200 shares for $50. I'm trying to get in lower on the 8 other contracts.
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The treasury is selling 15&30 year bonds tomorrow. I don't think anybody (hello China!) is going to be buying them and that will send the market down.
FAZ hits a new low today. Usually that is the best time to buy the most toxic ETF ever created. Hold for 30 seconds or less. Like a stick of dynamte with a really long fuse.