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Combination Trades for the Value Investor
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Writes Tim Melvin: "We are getting close to the point where more aggressive long-term value investors should start thinking about putting on combination trades. Volatility has been bouncing around quite a bit lately. If we get another leg down as I believe we will, volatility will rise, and we should be able to get sufficient premium to justify this type of trade. A combination trade involves buying the stock and simultaneously selling both an out-of-the-money call and an out-of-the-money put. The key to this trade for a value investor that is you must like the stock at the current price and be willing to buy more shares lower." Read more here.
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