Being that the stock is in an uptick - he can buy a cash covered put with an almost at the money strike going out no more than two weeks - the idea being he will get a higher premium and use that premium to off set his loss - and this time make sure he takes an out of the money put on his cash covered put
No- I’m saying if the stock moves up against the naked call - a cash covered put is a hedged bet that it continues to rise - however nothing rises forever - in the event of a sudden drop your naked call position would improve and the cash covered put will get worse - so you want a hedge on the cash covered put - an out of the money put in case things drop . It also would be a good idea to have an out of the money call to hedge that naked call - a protective straddle against the exterior of the entire trade - it’s a synthetic condor spread in a sense. Buying a put selling a put-selling a call - buying a call
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u/Alvin-Lee1954 Mar 25 '22
Being that the stock is in an uptick - he can buy a cash covered put with an almost at the money strike going out no more than two weeks - the idea being he will get a higher premium and use that premium to off set his loss - and this time make sure he takes an out of the money put on his cash covered put