I spent too much time watching money drift sideways yesterday. I was thinking about something too. A weird idea I had and now I am thinking of making it weirder. I wrote the other day about the cider press method of making long calls more valuable by increasingly rolling them down each week. Buying increased exposure to the underlying stock.
The inverse could also be true and maybe even more powerful. Get an extremely long dated short call and then make it more worthless over time. The only thing is it is almost more favorable as stocks aren’t guaranteed to rise but the sun is. Every day upon its own self degrades the value of a short call just a little bit.
It all came from doing some simple math on a couple positions I opened on Nvidia. I added them together, and was a little surprised at the value. I didn’t think about it that way. I sold a short position to open a long one and created the potential for a very outsized gain. Simply from that one move.
Now if I were to do this more often, on more positions, it is possible I could create even more money with my weekly deposit. It is kind of a crazy idea and deserves a little more thought and that thought shouldn’t be before 5:30 in the morning, but the interesting thing is rolling down a long position decreases risk a little bit while rolling up a short position decreases it substantially. It is all about the allocation of funds.
Anyway it is something worth thinking about, but I have a current plan and a current theory so this goes into the future bucket of ideas. That bucket is practically overflowing at this point and I already have too many ideas to ever act on, but that doesn’t mean I should stop having them. If I have twenty ideas a day I might find one worth acting on.
The real point is theories need testing and we should only test one idea at a time. Can’t be trying to do too many things at once even if we think we’ve discovered something shiny.
David Huzzard Writes 