• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 8. Combination Conservative Tech... > The Ultimate High-Return Strategy

The Ultimate High-Return Strategy

It is wise to shun any strategies that are overly complex, unclear as to risk levels, or complex for tax purposes—which immediately disqualifies an array of possible option strategies: the distinction is clear between conservatism and outright speculation. By the same argument, there is also a difference between those who appreciate simplicity and those who are attracted to the exotic, the complex, and the difficult to understand. Some option trading takes place for the enjoyment of the complexity rather than for a specific desire to create profits.

One particular strategy is especially appealing because it creates an immediate return, it is not complicated, and market risks are not increased. A straddle involves the simultaneous opening of a call and a put with identical strike prices and expiration dates. By modifying the straddle, we can create a short position without also facing the near certainty of exercise. Instead of employing identical strike prices, we employ out-of-the-money strikes to create a short combination made up of covered calls and uncovered puts.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint