Synthetic Thoughts

FWIW…just some random things going through my mind (scary, I know!) concerning these longer term positions I’ve been trading.

1. If the stock implodes just after setting the trade the overall position will show a big loss initially. As time goes by, further drops won’t be quite as extreme.

2. What will a synthetic look like at expiration if it’s sitting at max loss? Correct me if I’m wrong:

Long call will be at zero and the short put and disaster put will be showing a loss equal to their width.

3. By using 2 above, I can calculate how much more possible downside is sitting in the current position….if you want to assume the worst that we wake up tomorrow and the market has sold off so far that all synthetics immediately go to max loss…and can my account handle that?

4. How would I handle a worse case scenario whipsaw near the end of the trade that results in the weekly short calls being well in the money but below the core at expiration? Chances are if it gets to that point there’s a ton of profit realized already. I could take the loss on the short calls and move on down the road or…what I would probably do is roll the calls up and out and set up a new synthetic and start all over since the stock could be recovering at this point.

5. I’ve looked around online and there are lots of sites talking about the LEAP diagonals but most only concern themselves with just selling monthlies and if you’re wrong on the direction to just take the losses and look for something else. Can’t find anyone talking about selling weekly for the entire duration and the profit potential of that. Maybe I’m missing something…

Good luck everyone!



Ol’ Whiz had been calling for a Facebook implosion for quite awhile. His latest update though has a switch in his longer term sentiment on it. He’s saying a longer term position could be worthwhile now since he’s predicting “The Zuck” is going to resign and take a token position in the company and they’ll bring someone new in to take over the reigns. This will all be good for the company and possibly get them out of the daily news cycle…(worked for WYNN I guess…LOL).

I may take a shot…possibly synthetic but more than likely just buying some 2019 LEAPS and sell weekly against them. Premiums are great and shouldn’t take any time at all to recover the initial investment then everything else through the end of the year is pure profit.

Looks like the whippy market…

Looks like the whippy market will continue. Up 10 at the open, back down to 6 and now up 13.

Will convert some of my short puts to #jadelizard and strangles on the etfs tomorrow to bring additional $ and help stay in positions through the CHOP!