You are very brave doing a synthetic long in this market. I appreciate what your strategy is to perusing financials of IFL. Good luck.
@kpax
Thank you, but I really do not see the purchase of a call option as being an indicator of bravery. Quite the opposite in fact, in this instance, as it merely reflects a lack of confidence; I simply do not feel comfortable enough with the Company, at this stage of due diligence, to take the full downside to its equity.
Besides, the option happened to be, in my view, very reasonably priced.
I personally would just write a 8.50 naked put. Then get exercised on the stock if it dives. By that time you would have gleaned what you need
Regarding your written put strategy, I personally would only contemplate selling a put option if:
1) I felt completely comfortable buying the stock at the strike price, and
2) I got handsomely rewarded in terms of time value (i.e. premium received vis-a-vis time to expiry and intrinsic volatility of the stock).
In this case, your 8.50 strike is only 6.2% below current price, and I haven’t yet decided whether I’d be happy to buy the stock, and take full downside to it, around its present levels [*].
With respect to the time value of the put, I do not view it as being attractive for the very same reason why I regard the call option as being cheap: the implied volatility it is trading at seems too low relative to the leverage to FUMAS inherent to the stock (and the likely mark-to-market volatility of those underlying funds).
If you want to see it in numbers, a written 3-month (furthest liquid expiry) 8.50 put would currently afford you roughly 1.5% of your exercise cost, so I see it as being hardly worth the hold on cash.
Hope this helps, cheers
[*]: I say “full downside” because, when I buy a stock, I never use stop-losses; I only sell if and when my investment rationale is proven wrong at a fundamental level. Until that point, I regard every price drop as a buying opportunity (within some pre-determined portfolio limits).
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