Welcome back Des,

We open a new posting because the previous posting for your question here. Your question was

"very enlightening email. Been trying to get you through your old email. Its been a while since I posted. Been 2-3 yrs since I took the course but no good progress yet. Have not even earn back what was lost still. I have only been using short guts too. Guess must have miss out some of these important points that you stated. HAve a quest: For the position not rolled over, when there is assignment at the end of the month, I construct a new position which should be 2-3 months away?

Replies are provided in next posting below.

We believe those short guts you built on were on either stocks or underlying with trading price below $80.

If you are focusing on those counters with trading price of $30-$60, and you built them by using front months options, coupled with tight range between the short call and short put, it is hard to make a good and consistent return in this gapping down markets.

We found that those focus on SPY or ETF with trading prices more than $100 were doing much better in this ultra bearish time. Those who rolled earlier before the underlying dropping near to the call strike price were doing better. With underlying more than $100, we can construct the short guts with a wider range and reduce the likelihood of repairing.

Thank You.

Your question on 'For the position not rolled over, when there is assignment at the end of the month, I construct a new position which should be 2-3 months away?".

I believe you are referring to short put. Say the Sept short put expires and you get assignment. You sell off the underlying the following Monday and sell the put again. Yes, try selling to 2-3 months ahead so that you could choose a put strike price which is further away. You do not have to roll many times as and when the market recovers strongly.

I came across one options writer: He is selling so far ahead with wides range so that he does not have to worry every day and every week. His example:

March 2009 strike price 110 call and March 09 strike price 140 put when the underlying was at $125. He targeted $600 per set in 6 months. Low returns but the probability of the underlying ending in the range is higher.

Thank You.

Thx. Just had some time to reply, work is tight.
I think now there are some adjustments made by the top. Its affcting options too. Rolling down to other months will be hard now, they are limiting the chain for futher months. What should be done now?

Dear Mr. Des,

If the furthest month to roll is March 09, then we can roll to March 09. If it drops again, and no further months to roll, you can roll to March 09 again, of course to a lower strike price.

Did we answer your questions here? Please write to us again if we fail to answer the questions properly.

Thanks a lot.

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