Email of the day
Comment of the Day

February 15 2012

Commentary by Eoin Treacy

Email of the day

on yesterday's response to the email on options:
“I trust you are well & as ever enjoying these “interesting times”. I think there may have been some confusion in the exchange with a subscriber about using options to replicate your short in Apple. If you sell puts you are in effect creating a synthetic long position in that you need the shares to rise. If you have sold puts it will cost you money if the shares fall below the puts' strike. The way to replicate an outright short using options is either to sell calls or BUY puts. This is obviously very simplistic and as you know there is also time value to consider when using options."

Eoin Treacy's view Thank you, and a number of other subscribers, for alerting me to this error. Yes, of course, selling calls was the correct strategy and I have amended the copy accordingly. This options primer, generously forwarded by a subscriber, may also be of interest.

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