Search results

if your primary goal is to lock gains then selling calls might be more aligned with it in terms of payoff than buying puts - also, riskarb made a suggestion in another portfolio insurance thread to do both, i.e. sell calls and buy puts, which seems like an excellent idea, although i have not yet...

i had problems with EUREX backfill this morning European time, until about noon - similar thing happened yesterday, i.e. no backfill for EUREX for a few hours.

i used to think so too, however, recently i had to compare volatilities, and it turns out that dax and estoxx volatilities track each other very tightly, the difference between them is negligible, much less than S&P vs Dow, it's more like S&P500 vs OEX/S&P100 - it was surprising to learn this...

i think i have seen either an academic paper or actual trading record detailing the relationship between VIX fluctuations and S&P fluctuations - i can't think of where i saw it, i may have it somewhere in my archived files - clearly it's a non-linear and non-stationary relationship; the added...

ok, thanks for correcting, i wasn't sure - i just think that leveraged put selling is one of the riskiest areas of trading; it's the realm of highly sophisticated and well-capitalized institutions - now when these smart guys want to buy puts from you, you have wonder why they are so eager to...

sounds like the big boys got sick and tired of being burnt by Enrons, GMs and Uniteds (wasn't Sprint, which is on the list, already bankrupt once, and TimeWarner's AOL disaster could have ended much worse) - so they are having trouble laying off default risks onto the institutional side - ah...

well, you will have to manage risk with trading both futures/stocks and with options; perhaps even more carefully with options given that they typically carry higher leverage - in addition, i think that options are more (cost-)effectively used as a (partial) hedge against a naked position in the...

ok, thanks, that's a good explanation - i'd also add spreads on the underlying vs options to be taken into the cost-benefit consideration; which confirms my sense that the allure of options is more speculative (i.e. leverage) rather than any economic advantage. also, i was primarily thinking...

my post was questioning the benefits of buying options solely for directional trading; hence i was ignoring option's volatility as it is not a relevant factor affecting directional trading of the underlying.

your example doesn't explain why trading an option makes more sense than trading the underlying, if your goal is directional only - with the option you pay for time premium and carry vega risk, you don't have these costs if trading the underlying.

also, i can't understand why people buy options as a directional play - buying options is a volatility play, i.e. the direction can go your way but you still won't make money unless the actual volatility is greater than the implied volatility purchased (assuming holding until expiration). i...

here's my guess: most of the volume is typically in ATM options - the probability of ATM expiring in the money is the probability of a move of over 1 standard deviation before expiration, i.e. (1-0.68) / 2 = 16%, assuming standard normal distribution. this percentage would be lower for OTM...

thanks a lot - the two plain language references contain excellent summary illustrations; these are very useful concepts; really appreciate your input on this, H. - all the best.

hi 5 pillars - a couple of comments 1. you keep stating 1% a day returns - since you are saying your max target is 7 ticks on ES, my best guess is that you are using $2,000 margin on ES and calculating 1% as $20 net profit a day, or 1.5 ticks net...? 1.5 ticks might be credible, but 1% a day...

from the screenshot, it looks like this setup will end up triggering limit orders on both sides at the same price... - seems there is a possibility here of taking the other side of your own trade? - in this case, it will cause some sort of churning (aside from legal issues?) - this setup seems...

thanks Kevin, i have looked up the Splus paper; not sure if i have found the right one (it was on the FX crosses), but it's nice to get at least a remote idea of what they are doing. would someone knowledgeable be kind to explain / summarize in layman's terms (or otherwise) what "volatility...

to take an example: market is 999.50-999.75; then market moves up and price prints 1000.00; what % of volume from the limit orders queued at 1000.00 ends up getting executed, on average, before market moves back down a tick? (i.e. orders pre-existing at the time of the first print) i am...

thx riskarb - i guess i was referring more to a trade like your nikkei trade, for example - you are short 1 future against 3 puts - if there is a big down move / gap, you potentially have 2 unhedged puts in the money with delta close to -1.0 (assuming you are unable to hedge / market halts)...

thx, i missed this, will be interesting to see if this becomes a volume product.