So at the moment I will go Long puts on stocks that I feel are at a top and have run to far. After they correct I will Short Puts and collect the premiums and possibly buy them at a great discount. When I Short the Puts I will also probably buy inexpensive OTM Long Puts below my target price just to give me a floor in case of a crash.
One ques., In Feb I'm Shorting the June Puts because of Ex is that month and we expect the pps to move up?
thanks again Doc for all you do for us on this Board!
"One ques., In Feb I'm Shorting the June Puts because of Ex is that month and we expect the pps to move up?"
It is somewhat arbitrary. Next EX is actually in April and that forward distribution is calculated into the price of the ITM June options, but not Feb or March. So after the EX in April the price of the 87.50 will be reduced by 1.29 if the PPS is close to the strike. As the PPS then recovers after the swoon post EX in April, you will get another chance to buy back the option.
You should use an option calculator to make sure you are getting fairest value(ivolatility is the one I use). Register and it is free.