TSC Options Forum: Go Your Own Way

Working the Market

For professionals and market makers, boxes -- and their relatives, the conversion and reversal -- are basically risk-management tools or interest rate plays. But for the rest of us, they provide a great way to see how multiple-strike positions can be broken down into the component parts, making it easier to scan for equivalent replacement positions.

We've all been frustrated being unable to get a tradeoff at what we believe is a "fair price" in our chosen strike. Being able to look at other strikes and identify better prices when confronted with wide bid/ask spreads or thinly traded issues (or any other obstacle that keeps us from establishing our position of first choice) is invaluable. The flexibility to move to a second, third or even fourth alternative will allow you to execute more trades, and hopefully, be more profitable.

I know this covered a lot of ground, but I'm off next week (it's my honeymoon!), so I wanted to give you plenty to chew on while I'm gone. I'll be ready to tackle your questions when I return.