this is the holy grail everyone would love to have...
well, im still studying into if it works or not, but i need to simulate against price movement and changes in implied volatility.
the main idea is to use theta decay differentials with respect to different expiration dates to generate different rates of decay in each options position.
mainly im using a collar, so long stock, long put, and short call,
except that i long 4months put and short 1 month call for 4months, and exploit the rate of decay since 4x 1 month call sold consecutively is worth more than 1 4month call.
and i would go further out in the put say afew dollars more compared to the call, so say i buy a put 5 dollars away, i sell a call 2 dollars away, because of the gamma curve, i can exploit gamma positions to improve my put cost and call cost, as another way to look at gamma is the if we fix the underlying price and strike price is the one changing, it would produce the same curve.
after that if my position stays the same no change, i win by default since 4x 1month call > 1 4month put.
if it goes up and gets called away in the first month, i just box spread the long put and forget about it.
if it goes down, thats where im stuck, still modelling for it.
so theres exploiting the deltas, gammas, vols if implied vols smile is there, i may switch and do a reverse collar, theta decay.
so the idea is to lock in potential losses of a stock using puts and keep selling covered calls against the position to recover the losses, but the twist is here, we know how much we can lose before we enter, so we can reasonably estimate how to do the covered calls against the position, and come out ahead with income or even speculative gains too.
