Search results

It's not a backspread - in a call backspread you sell the near strike and buy the far strike x 2. Same for a Put backspread. I don't believe the above is a recognised strategy, but hey, what's in a name ?

Thanks guys. I'm gonna make squillions $$$ £££ !!!!

Can somebody tell me how to calculate future volatility please ? TIA

A basic / elementary introduction to options. My suggestion for any newbie would be to read this one first, then his bible. I had (wrongly) assumed that this book would be more advanced than his bible, so I was very disappointed to find him writing this basic stuff.

polpolik You haven’t said how far apart the strikes are, but assuming they are the same distance in both spreads, then Spread 2 will always require more SPAN margin. Look at the leverage – if the underlying gaped up 10% on Monday which spread would you prefer to be running ? Well...

Try the search function on this site. http://www.elitetrader.com/vb/search.php?s=&action=showresults&searchid=1816301&sortby=lastpost&sortorder=descending

You have to ask yourself, why then doesn't everybody do it ? Anyway, that debate has been done to death here:- http://www.elitetrader.com/vb/showthread.php?s=&threadid=53037&highlight=writing

Yes you could use monte carlo, but I find it too long winded for the same result which can be calculated by formula. I constantly use probability of touch in my trading.

The formula is quite complicated, I'll see if I can dig something out. But my understanding is that the probability of the underlying touching a strike 1 StDev out is roughly twice that of it expiring at or beyond the strike.

Whenever we trade we have to pay a spread / commission / clearing fees. Whenever we trade we lose edge, so my philosophy is to adjust (trade) only when the risk is absolutely no longer acceptable. I measure risk in terms of position delta and typically I’ll tolerate fairly large delta’s for...

The best way, by far, to make money selling options is....to write a book telling people to sell options :D They do say there's one born every minute.

Anymore ?

So selling options 2 or 3 sd OTM is called "market profile" trading ? That's a new one on me. Thanks.

Excuse my ignorance, but what exactly is the "market profile" way ?

Then allow me to re-iterate.... For options that settle into cash or stock the futures value as traded in the market is a good approximation to the forward value. It's as near as damn-it. Where no futures are traded in the month of options expiry you can derive the futures value from the...

I hadn’t considered the case where options settle into futures contracts, and concede your point regarding the forward value of those options. However, the original Q related to DJX options, which (I assume) settle to cash, and to which my answer(s) relate. Agreed. You could of course also...

Exactly. Logically then, the futures value (as seen in the market place) will be the forward value of the underlying. Not so. If the futures value differed (significantly) from the forward value then there would be an arb to be had by buying one and selling the other. This principle applies to...

Isn't that what I said (excepting continuous compounding) ? If you really want to split hairs then how does your formula account for the interest received on the dividend stream ?

Forward value = cash + risk free interest rate - future dividends. But estimating future divs on the index constituents ain't easy ! It depends what accuracy you're striving for, but I would suggest that if you're going out as far as Dec08 then just using the DJIA yield as a substitute for...

You need to look at the forward value of the DJX, not the cash value. The delta values will then make sense.