Search results

I know what you mean, but CL is probably not the best example. At the moment, the CL skew is quite even up and down - a true smile of volatility. I love the crude skew because it is very pliable - the call skew can be steep while the put skew is flat, the put skew can be steep while the call...

I didn't really think I'd come out ahead on this - I was mostly just curious to find out what would go wrong. If it hadn't looked so good, I would've done more!

Last week I did the Oct. 85 reversal for -87.75, a theoretical lock of 2.75. I just did a one-lot, as the point was mostly to see if I could hold it until expiration and book the profit. And the romantic in me wanted to believe that somewhere in America, there IS such a thing as a free lunch...

Jeb, you'll get no argument from me about anything you said. There was a time when I traded silver and gold options on the comex floor, and your story sounds completely credible. But the volatility patterns of SPX are the exact polar opposite of the volatility patterns in metals (and all...

That would seem to make sense, but history shows otherwise. It has never happened that the market made a sharp move up and implied volatility increased. Never. So if you sell otm puts and the market drops sharply, you get double-whacked on both deltas and vegas. The flip side is that if...

This is a wonderful example of a logical non-sequitur. Imagine a game where two dice are thrown. At each throw, if any number from 1 through 11 is thrown, party A wins a dollar from party B. But if a 12 is thrown, party B wins $1,000 from party A. According to the above logic, it is...

Isn't it silly to argue blindly about the appropriateness of buying or selling premium in a vacuum - without factoring in the cost of that premium? When considering whether to buy something, wouldn't you want to know the price? Wouldn't that be a consideration? If somebody wanted to buy...

My pleasure - glad to hear it's helpful.

No difference, you can't lose more than you paid for a long futures option either. I would be puzzled too. Call your firm and ask them what's going on.

You wrote "unkilled trader" instead of "unskilled trader." I like it your way better. If I were counseling an "unkilled trader" who wanted to remain unkilled, I would never counsel him to do any of the above in the random manner suggested. Buying options because it's Monday is not a...

BTW - going back to the discussion of the NVDA 45 calls - that is why the VIX calculation includes every SPX option "with a bid greater than zero." That simple filter eliminates the distorting effect of SPX options too far OTM to trade (the SPX equivalent of those NVDA 45 calls).

The price of an ITM put is composed of its intrinsic value (strike minus price of the underlying) plus time value. For the purposes of calculating IV, only the time value is used. Interest rate considerations aside, the time value of the 45 put should equal the price of the 45 call, since the...

Forget about the puts for a moment, and look at those calls. From the 22.5 calls all the way up to the 45's, they all are 0 bid at .05. Now, the 22.5 calls are maybe legitimately 0 bid at .05 - meaning there's a prayer someone will pay .05 for them. But clearly there is NO prayer someone...

The question would have been better phrased if they simply said "price" rather than "theoretical price." Every product of an option model is theoretical - it's confusing to single out price.

I would say A. DELTA is the rate of change of the THEORETICAL PRICE with respect to a change in the underlying, and GAMMA is the rate of change of the DELTA with respect to a change in the underlying. So delta is to theoretical price as gamma is to delta.

David - would IB just charge me for borrowing the stock with no warning? Hardly seems kosher. IB - are you listening? Any comments?

Well call me a hopeless romantic, but I had to try it. I just did the Oct reversal for a "lock" of 2.75. Doesn't make a bit of sense to me, but there it is. IB didn't seem to have a problem with me borrowing the shares. I can't help but suspect there's something going on with the stock...

I haven't seen anyone mention Oct. '87. Does anyone imagine they could safely manage such a position through an event like that? Will it happen again in our lifetimes? I don't know, but I'm not willing to take a position in which a single event - no matter how unlikely - would wipe me out.

Right, try it small and see how it goes. I'm not saying your approach can't work, just that you need to be aware of all the different ways options move other than in response to movement in the underlying.

If you expected to buy the option and either hit your target or get stopped out all on the same day, then your scenario above might make sense. But since it's highly unlikely that would happen, the element of time seems to be missing from your analysis. Are you taking into account the fact...