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After reading up on the subject I am still convinced that it should work in theory. It seems to be similar to index arbitrage where one sells the index components and buys index futures if they get out of line. At expiration date we know that the index will be the value of its components. So...

Thank you for the answers so far I need to read up dispersion theory it seems. At expiration date the index will be the value of its components and therefore it seems that the put option I bought should offset the total risk of the options sold (on each index component). Why is this not the...

Hi, I have been thinking about some options strategies lately. When looking at stock options they seem to generally have more premium/volatility priced in compared to stock indexes. Is this a correct assumption? If the above is correct it should be possible to “arbitrage” a profit...

Thank you for your reply. I am referring to situations where I am able to locate the stock at the point of sale (stock can be borrowed) but the borrowing costs are high. Sometimes it is cheaper to “roll over” the position every three days than to actually borrow the stock and deliver it...

Hi, I am working on a strategy that requires me to short stocks that are expensive to borrow. In many cases it is impractical to create synthetic short stock via options so I would like hear your opinions on an alternative way. When selling stocks you need to deliver the sold stock to the...

Hi everyone, I am developing a system that requires me purchase a security where I am requires to be short a security when the market price is below a certain price and long when above. Due to the spread this is quite costly in whipsaw markets. Example: If price < 100 then Short If...

I am trying not to be ignorant and you guys are probably right; I certainly do see the obstacles. Since I cannot backtest it I will write a small system to test a selling strategy on a lot basket of stocks and evaluate the results. Again, I do appreciate all your feedback. Certainly I will...

In that case I would but 1 long stock (x 100) to hedge the call sold. No need to hedge the put. kr, Steffan

Yes, sure; buy could you elaborate a bit?

I did not mean to put the burden of proof on you, I would like to test it myself but do not have data for a backtest. Therefore I need to do a slow “forward” test and take all the advice I can get from experienced traders. For the record: I do believe in efficient markets but there are...

In a trending environment (in either direction) the hedge only needs to be bought or sold once before expiration - so in that scenario the strategy will be profitable. The user “meanreversion” argues that the market have priced in the number of whipsaws (each is obviously a cost) that...

Thank you for your comments. You are arguing that the price (on average) will whipsaw the strike price and thereby eat up the premium collected – did I understand that correctly? I am a big fan of back testing, unfortunately I have not been able to backtest the strategy because I miss the...

No, I do not intend it to be a matter of luck. Maybe it is best explained with an example: Day 1: AAPL stock: $350.00 Sell May $350 Call: $7 Sell May $350 Put: $7 Pocket $14 and have $350 cash balance reserved for trade. Day 2: AAPL stock: $351 Buy AAPL at $351 to hedge Call sold...

I would like to share a strategy idea with you guys and hope to receive some constructive feedback. Basically I am considering selling both Puts and Calls on the same stock (on the money) simultaneously while maintaining enough cash to buy the stocks long at the strike price. If the stock...

Hi HowardCohodas, Thank you for your reply. I will indeed read up on this but is unsure if this is a clasic credit spread. If you do not mind me asking; where do you see the edge in the CS strategy you deploy? Is is time decay capturing, risk management or something else? Appreciate...

Forgot to mention that I use call options in the example. Kind regards, Steffan

Hi, As a paper trader I am working on different systems and was wondering if you guys mind commenting on this idea: It is clear that close-to-the-money options trade at higher premiums than further away options. Therefore I was wondering if it would make sense to trade the premium spread...

Hi everyone, Does anyone know how to mark an order "post only" via the Interactive Brokers API? The API reference guide does not mention it, or I am blind (entirely possible). Thanks a lot in advance!

Hi everyone, Does anyone know if IB charges fees for US option order modifications? From the homepage it seems that they do charge for cancellations and imply that this might also be the case for modifications. In my strategy I need to purchase/sell options at aggressive prices inside the...

Hi, I am setting up a trading operation doing systematic options trading (high volume). In this strategy pegged-to-stock orders are of the utmost importance and an essential part of the system. Unfortunately IB restricts the number of concurrent active pegged-to-stock orders to just...