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You're talking about, all be it in simplistic form, whats known as dispersion. The problem is that all or close to all the dispersion books got smoked. Its not really a retail investors strategy because of what you mentioned... capital

Atti how many do you think know the old haircut term? How bout this one "mixed straddle tax status"?? LOL

When you take your options skills to a higher level more often then not you wont be trading direction or trying to time the markets from a directional standpoint

tons of those strikes sold too

You'll find there are quite a few current and former market makers here and most are happy to answer questions. The thing is we all have had our own personal expereince on the floor and in different products, which is to say there is more than one way to skin a cat. Each mm or mm firm will have...

Good luck getting a seat at the NYMEX and the contract size is huge, you have to put up some size cash to be a MM there. Also it’s good old pure broker allocation so plan on months of getting shut out and shit trading through your bid and offer. You know how it is, it’s all about...

I never got why some MM's would not trade with any other MM or FIRM guys. WTF? do you think they really know more about how those options are priced then you do? And if they do why the heck are you making markets in that stuff then anyway? I would trade with anyone who wanted to hit my bid or...

Who would underwrite the contracts? Who sets fair market value for the underlying. They already list some real estate options on the index and futures.

Lets face it... there is no secrets at all in fact in the old days the markets were wide enough only the really new guys needed to use the sheets. Whats so hard in the CRT sheets that they needed new sheets every hour of the trading day? The print of their sheets was so small who the heck could...

Good thread, I would add that rather then sheets these days most guys carry a hand held with real time pricing on it and they can execute underlying trades with the hand held too. I remeber the old days of sheets where the CRT guys used to have to sign their trading sheets in and out and...

Jones, Consider the return you're seeking and then compare that to what kind of return is realistic. Do you really believe a return anywhere near 50% is a reasonable expectation without a large amount of risk? If that was achievable don’t you think you’d have heard about it?

You're correct it would only be the case if those options were just a penny or so in the money otherwise its throwing away money. dagnyt is a stickler for details and he's generally correct.

obviously

They're exercised automatically

No biggie

Actually in equity options the out of the money puts will trade with a higher IV and taking that one further the winger calls or puts will trade at a higher IV then the AT's

Exercise is basically automatic these days so the people who are long those calls dont have to do anything and those options will be exercised for them at expiration so long as they're in the money.

Cash settled is cool so long as its european exercise. Its a bitch when they're American because you can nicely hedged position and wake up the next morning find out you had an assigment and your net delta is totally different.

The SPX is a cash settled Euro style option so you cant exercise it early. They either have the choice to close out the position in the market place or let them exprire and get/give the difference in the strike price and the Friday morning opening settlement price. The closing mark is not...

There is an easy case to be made that t/a and options dont have to go hand in hand. Most institutional traders are not always directional players, there is a whole big world out there in options who are volatility traders.