Search results

So answer me this: in an (idealized) environment where the interest rate is zero and the underlying pays no dividend would American and European calls/puts be worth the same? Early-exercise would not be an issue then...

Care to elaborate? Put-call parity would seem to indicate that they are the same (carrying costs and dividends aside)

Analyze/Risk Profile on ToS is a very very helpful tool however a well known "flaw" is that when calculating the risk profile graphs it uses a flat IV (in this case it uses the stock's IV: 12.73%) to calculate the estimates of Probabilities. In the case of your call that particular...

This is incorrect right here. Flies and Iron Flies are synthetic equivalents; the only difference is that flies are entered into for a debit and can expand up to max profit while iron flies are entered into for a credit and could potentially expire worthless (short options ATM) giving you max...

You mean the dividend risk of being SHORT a DITM Call right?

For Options Trading most people will point you to one of these three books (among many others but these ones are a good place to start): Option Volatility and Pricing - Sheldon Natenberg Options as a Strategic Investment - Lawrence McMillan Options, Futures and other Derivatives - John Hull...

Like spindr0 mentioned before, options are a way to set up stretegic positions. In this case you bet on something happening and that something has unlimited potential profit for you (vs limited max loss). Time works AGAINST you For an Option Seller the bet is usually on something NOT happening...

The "Daily P/L" is usually* calculated from bid/ask mid-price which might be skewing things. In any case, the real numbers are in the bid/ask columns *Depending on your broker

Both your long and short positions that are ITM are auto-exercised, there is no need for you to initiate anything and in fact you may make things messier if you do. I have been in the situation you describe and if you let it go through expiration you come out the next day in the morning with no...

Trading options IS trading Volatility

20% of what? of the credit you received? Or 20% of the total risk (20 points x 10 contracts x 100 shares/contract = $20,000, so 20% of that would be $4000). Keep in mind that if you are bailing out when the mark-to-market value of your spread shows a loss of $4000 then your probabilities (18%...

This is very interesting, but let me make sure I am getting it right. Is the problem with such a position that if VIX goes up because of a certain event (thereby breaching your short VIX call), even if SPX goes down (which, with a VIX blow up event it would most likely mean S&P is going down)...

First things first, you don't have a bear put spread, you are short a put spread which is a bullish position. The reasons why you might have seen a daily profit even though Nasdaq went down can be: 1.- Your position is long theta (around $8 a day) so you make money with the passage of time 2.-...

12 instances is hardly statistically relevant and especially statistically relevant enough to build a trading strategy around it.

He/she would still have unlimited risk (well, down to zero on the put side) so, while definitely an improvement, I think that for an earnings play he/she would be better off buying cheap wings to define the risk either on one side or on both sides, especially if the account is not very large.

As with everything in options it depends on whether you want more risk or reward in your strategy. Right now you could get a fatter juicier premium with the roll but that is because your short strike would be right there where the underlying price is so it is more likely to end up ITM at...

Who knows ! People said the same after the failed Obamacare repeal and it happened 3-4 times already (lost count) and here we are at all time highs.

It is a bit unclear what your current situation is and what you are trying to achieve ("Rather than writing naked options for premium...") so I don't know what your objective is and it's hard to get a handle on something that might help you out. You can certainly create a synthetic by buying a...

I have seen it explained elsewhere for a move in the underlying (for example, an up move) as: 1.- A shift to the right of the whole IV curve so the ATM stays at the same level (horizontal shift) <--This means that this explanation starts from a sticky-delta assumption 2.- A move up or down of...

Are you implying that for "small" or "measured" or "normal" or "non-large", moves up or down in the underlying the actual skew doesn't change and it's just a parallel sinking or floating? (I am referring to equities and equity indices). What about large moves?