Leaderboard

No, this is the type of trade you can get into anytime -- just do the math on it. (And after more research,I actually think I like the ratio to start, and if the price falls, convert to a straight diagonal). Please note I ignore commissions in my calculations because everyone's are different, please include them in yours. For instance, the price of GLD is currently 115-116, and the Sep 116 Put is trading at 6.05 (12 weeks to expiration). Let's say we want to do an 80% ratio again (like we did on SPY). So 5 contracts of GLD will cost $3,025.00. A 5% per week profit is $151,25, so for 12 weeks, $1,815.00. That's a total of $4,840.00. So how much do we need per week on an 80% ratio? Well that's just = $4,840 / 100 / 4 / 12 = $1.01 per week. Is that possible? EASILY at the current GLD prices. To further protect our shorts (just in case the ratio does not fully), we're going to go further out, to two weeks on our shorts, to the July 15, 2013 expiration. Well the 118 strike gives us a $2.02 extrinsic credit -- which is just perfect. So if were to open this trade today I would: - Buy to open 5 SPY Puts Sep 116 @ 6.05 - Sell to open 4 SPY July 12, 2013 118 @ $3.80 Then in one we week we roll to the July 19. What adjustments need to be made during the week? Well if on Monday - Wednesday there's a BIG spike up (probably over $4-$5, I would consider rolling the July 12's up, we just have to look at the extrinsic values. If things go down -- we don't worry about it. The 20% ratio, and extended theta, will help cover the paper loss on the short. The risk to the trade is a prolonged runup in the price of SPY, as that will drop volatility, lose value on the puts, and make getting our weekly premium's harder. We can always roll up and out though.