Search results

Sure it's not perfect as there are some flawed assumptions behind this, but it is an easy and accurate enough way of scaling volatility.

TOS trading platform is superior!

Volatility increases with the square root of time. E.g. to annualize a daily volatility you multiply it by the square root of 252 (the approx. number of trading days in a year).

If both options are ITM then both will be exercised and you'll be left with the difference between the strikes, you don't really need any margin here.

You asked for it! :D Vomma

No way, it's vomma that really matters!:)

As far as I know, Lambda denotes option's leverage (i.e. % move in option price given a 1% move in the price of underlying) and sensitivity to volatility is denoted as either Vega or Kappa, but I'm sure some people use Lambda to denote it. It's just semantics. Anyway, this Lambda (option's...

Oh ok, I didn't realize you talking about the CBOE TV/heat seeker.

There's a lesser known greek, Lambda, which is exactly what you described, i.e. a % change in an option given a 1% change in the price of the underlying. It is not available in TOS, though, but you can use the "Analyze" tab to estimate your points, not as easy as looking at the option's Delta...

How do you know it was buying?

The profit potential is less, everything being equal, so the risk/reward remains the same.

Whether to exercise the call to capture the dividend or not is a simple mathematical issue. When you exercise a call you get long stock, to replicate the limited risk characteristic of a long call you need to buy a put with the same strike price. You pay cost of carry on the long stock and a...

Depends on what features in a trading platform you want. You can negotiate lower commissions than posted at Thinkorswim or go to Interactive Brokers, which have the lowest posted commissions. Also see this thread.

You can't!

Check out this TOS chat transcript for the call calendar vs. put calendar discussion.

One mistake I can see is that Thinkorswim is $24.95 at 10 contracts not $30. At 10 contracts you pay $1.50 per contract + $9.95 = $24.95. With that said, Thinkorswim offers to match other brokers' commissions so if you'd rather trade with Optionsxpress' comm. schedule you can do that. So the...

Not really.

I don't think it was an arb, just a bid ask spread. There was a good chat session on calendar spreads some time ago at TOS, look it up in chat transcripts.

Basically, yes.

Yup! Generally, it's really just a function of the price - ITM are high priced hence the spread is high.