CCC - The Speculator's Directional Dream Structure

Over the past few weeks, I’ve asked several options pros with over forty years’ experience about a specific options strategy that I developed for speculators which has limited downside risk and unlimited upside potential (like a long call option or long put), yet is accomplished for a small credit (like a deep out-of-the-money short option position). The universal response to my question is that this strategy has no specific “name” per se, which means I need to name it. As a result, I’ve decided to name this strategy the Covered Credit Collar or CCC for short.

I developed this strategy for a consulting client who, as a speculator, wanted to place a directional bet with unlimited upside (similar to long futures) but didn’t want to get stopped out of their long position during a correction. When I said, “It sounds like you want a long call option.” He retorted, “I hate wasting money on option premiums.” At that point I asked if he’d be willing to write an at the money put against a long out-of-the-money call and then limit the risk by buying a deep out-of-the-money put against it. When I told him we could structure the whole position for a credit he said, “That’s the speculator’s dream strategy.” Well, I don’t know about a dream strategy, but it is a robust way of expressing a directional opinion with limited risk and unlimited reward.

Let’s say that the speculator is bullish on August, 2022 COMEX Gold which is trading around $1,860/oz. Using the CCC structure they could execute the following:

  • Sell the 1860 Put for a credit of $4,730.00
  • Buy the 1885 Call for a debit of $3,030.00
  • Buy the 1740 Put for a debit of $980.00



What could go wrong? Obviously if we are dead wrong on direction and gold drops to $1,740/oz or lower we would lose $11,280.00 per spread. That stated, it is very different than buying gold futures at $1,860 and watching it drop to $1,500 and losing $36,000.00. On the other hand, once the market rallies above $1,900/oz the potential for gains are exactly like being long futures. Finally, if the market settles anywhere between $1,860-$1,900, we keep the $720.00 credit (which is very different than buying the $1900 call and losing $3,030.00.

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Richard Weissman Disclaimer:

Please note that this report is intended solely for educational purposes. Investing and trading involves considerable risk and losses can be substantial. Weissman Consulting LLC is not responsible for any business actions, market transactions, or decisions made by readers based on information published, suggested, or recommended in this report.


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