Comments on Jordan Smith's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/jordan-smith/articles http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-98606 98606 Sun, 14 Oct 2007 14:03:19 -0400
What you have discovered is the basis behind valuation of options (risk-free abritrage). You can sythetically create an option by borrowing money and buying stock with the leverage. As Kapil1022 and Kyle pointed out above, your cost of debt would be effectively lower because of dividends you receive on SPY. Try the same analysis on a stock that has no dividends.]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-97115 97115 Fri, 28 Sep 2007 15:38:02 -0400 http://seekingalpha.com/article/36014-discover-financial-services-the-promise-of-morgan-stanley-s-spin-off?source=feed#comment-89311 89311 Thu, 21 Jun 2007 14:01:42 -0400 http://seekingalpha.com/article/36014-discover-financial-services-the-promise-of-morgan-stanley-s-spin-off?source=feed#comment-89233 89233 Wed, 20 Jun 2007 17:53:01 -0400 http://seekingalpha.com/article/36014-discover-financial-services-the-promise-of-morgan-stanley-s-spin-off?source=feed#comment-86654 86654 Mon, 21 May 2007 11:19:12 -0400 http://seekingalpha.com/article/36014-discover-financial-services-the-promise-of-morgan-stanley-s-spin-off?source=feed#comment-86631 86631 Mon, 21 May 2007 08:59:38 -0400 http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-86038 86038 Sun, 13 May 2007 17:12:47 -0400
Thanks for the idea. Not sure why, but I never considered using this approach on an index ETF for broad market exposure.]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85892 85892 Thu, 10 May 2007 15:43:03 -0400
The thing you forgot was the dividend on SPY that you would not receive by owning the call. If you factor this in, you will see that you are actually paying for the downside protection. Your position is equal to being long SPY and a march 120 put.

Kapil]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85833 85833 Wed, 09 May 2007 21:55:38 -0400 http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85732 85732 Tue, 08 May 2007 13:02:37 -0400
I encourage other readers to take a look at the site if they found my original article interesting.]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85729 85729 Tue, 08 May 2007 12:20:28 -0400
BTW This is called a "stock substitution" strategy, using derivatives in place of stocks, and it works well in low volatility environments. When the market's very chaotic, the price of those long options goes up and cuts into your profits.]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85728 85728 Tue, 08 May 2007 11:55:30 -0400
i.e. If you have stocks already you can convert them to options, essentially getting an unsecured loan until the leap expires.

Jordan]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85720 85720 Tue, 08 May 2007 11:26:07 -0400 -- Susan]]> http://seekingalpha.com/article/34795-can-etf-options-offer-cheap-leverage-to-reliably-boost-returns?source=feed#comment-85712 85712 Tue, 08 May 2007 10:51:10 -0400
I have never found for Free a service that plots option prices. That would be nice. Also, you much know basics of options.

Rod Baldwin]]>