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2 Responses
I’m holding a loosing trade on Boeing (BA). I bought a Dec 140 Put as a hedge and that got me thinking. What would be wrong with a Calendar spread 140 Dec Puts And sell the 105 Jan Puts to help pay for the trade. For the same price of a long put I could place multiple put contracts. I’m looking for input as to what could go wrong.
Dave
Hi Dave, great questions: Sorry for the late response. There really isn’t a downside to doing this as long as the trade doesn’t tie up to much margin in your account. The issue being it would take about 20 sold puts to cover the 1 bought puts premium (This will require a large amount of margin tied up). Looking at the options pricing and the current chart: I think the $137 low looks fairly stable to hold. So what you could do Sell the $135 Jan Put and that more than covers the cost of the Dec Put. After the Dec expiration you can decide if that $135 level is a place you’d be willing to buy more at. If not, you could close the short Put. And even roll the entire trade to the next 2 months: Buy the $140 Jan Put and Sell the $135 Feb put to keep the position protected. Hope this helps. Tyson