June 16 - Mid Day Alert

June 16 - Mid Day Alert


Because of the Volatility Spike today, I had a lot of messages from folks where they said that their brokerage is increasing the margin requirements for naked calls for all volatility products.

Instead of panicking, you can handle the situation by doing the following:

• If you have sold call(s) for this week's expiry, buy the call back. 
• Then sell the exact number of calls 3 weeks further for a suitable strike price i.e same or higher strike price

I did the same, and was able to increase my buying power substantially!!.

No doubt, since you sold this weeks call first and are now closing it at a higher price, you have a paper loss. But you are freeing a lot of buying power.

Next, since volatility is elevated and immediately you are selling equal number of calls (preferably at a higher strike price further weeks out), your buying power reduction will be lesser.

So the net result is you will have more liquidity!!!

After trading is over, I will send an email today evening (tomorrow’s daily tip) on what exactly I did.

For now, I hope you are able to follow this.


Thanks and Happy Shorting Volatility 
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