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Johno, I'm not sure that you are doing the kind of "static hedging" I was referring to. The academic papers talk about once a month because using an option portfolio to hedge you are gamma neutral and thus you do not need to do the daily rebalancing of dynamic delta hedging, which as you may...

Not mentioned in the article is a type of hedge using options called the "static hedge" as opposed to dynamic delta hedging, since it only needs to be done once a month. It uses short-term options to gamma neutralize longer dated options. It seems to exist in academic lore as a legend since...

You're foolish to let what iv trader says hold you back. It is staring you in the face. Look at the sheet in the demo and see the column called "Implied Volatility". You can change the IV for each option in that column. You can also download the free strategy evaluation tool and see...

Oh yes that really clears it up. All of us here thank you for the generous sharing of your wisdom.

Thanks for the clue and yes I did read that, but I asked for an explanation, not just an opinion. Despite what the puerile upstart wise-a** has to say, we are all here to learn. Sometimes people skip to their bottom-line opinions while the rest of us might appreciate seeing how you got...

Whether our diagonal example is called long or short gets us into option terminology purgatory. As a combination of a short vertical and long calendar, there seems to be no middle linguistic ground. You can focus on one of the greeks to pick the long or short description as long as we all...

Isources saved by rho? You've got to be kidding, but maybe you are serious?:eek:

Yes that seems to be one of the issues that is creating some flames here. Essentially you are taking on the entire options world in admitting that the two positions are synthetic equivalents but somehow they do have not have the same risk. I looked closely at your previous post and only found...

You may be the only one who thinks that. Have you read all the posts? Maybe you should explain your reasoning to the uninitiated. The full position is stock + married April07 100 Puts + short Nov85 Calls. Tell us why this position is synthetic long calendar rather than a synthetic...

You have answered many questions in all your typing, but some still remain. It seems that several here have now shown you that when you figure in the cost of carry, the premium on the calls is equal to the cost of the puts plus cost of carry. In #2 above you ask how to generate back the...

If I had to guess what his answer would be, or perhaps what it *should* be, the time premium of the November 85 call is greater than that of the April07 100 put, both absolutely and per day (theta).

1) So now we are talking about 20-30% of the position. I know this is because the short deltas of the protective puts (.71). I believe this would be your answer to why it would not be 100%. The amount you want to pay off is either $1.00 (April 100 put) or $6.60 (your April 80 put) -- not...

I'm glad MoMoney is here. Finally some class. Maybe he can help figure this guy out. I don't know how much this gentleman knows about options. I think his problem is he writes too much at one time. I asked two simple questions which should have required simple answers. I can only comment...

ISources, don't take this flake seriously or representative of others here. He is an immature would-be trader who is trying to learn and likes to show off by typing in silly stuff in any forum that becomes popular. Just ignore him. I did not mean to imply that waiting for the option...

Eliot, cost of carry is a cost .... deducted from your profits. The shorter the time, the less costs you have to pay, ergo ..... The April07 put we be the best choice. Now as regards the married position, obviously overall a call would cost less, but that is not all there is to it...

MTE, How are you calculating the 8.1? Eliot, don't start a good sentence with a "But". As MTE points out, your position *is* a synthetic call, so your question does not make sense. You can buy a 100 call and have an equivalent position, but there may be reasons why the married put would...

On the contrary I can't even read these charts. Why are they so small? They should be gifs or pngs and 50% larger. I can help you if you need it for that.

If he brings in that otm strike then he's got a standard butterfly -- at least in the example we're working with, and that wouldn't work. Option models are not perfect, but they are pretty close to it, except in certain known cases and this doesn't seem to be one of them. Recently some...

He's running 1 sigma into October so I guess that falls into the range. Not sure I know what you mean here by "well below above fair value" and don't know where you get that part about legging in. I assume you are referring to buying the future first and then buying the option, but benysl said...

benysl, your P&L figures would be better if you balanced the deltas when the future is triggered between the future and the short options. That way you wouldn't have to wait until expiration to net out. Speaking of which, why are you selling October instead of September? The odds of both...