Search results

Greeks depend on volatility so as volatility changes so will the greeks.

Market participants (retail, institutional and market makers) don't trade with the clearing house, they trade with each other. The clearing house comes in after the trade is made. Let's say that I come to the market and want to buy an option and you want to sell the exact same option at the...

What does an old car have to do with options? As it has been pointed out above, there are used car dealers who would buy the car from you, you may not like the price, but there are buyers.

Essentially market maker is the liquidity provider of last resort. If noone is willing to sell an option and a buyer comes in the market then market maker will take the other side (i.e. sell the option). The role of the clearing house is not to match buyer and sellers in the market, but to be...

A box spread holds together the prices of puts and calls at a pair of strike prices, so if you wanna see whether they are mispriced or not use the box spread rather than the two straddles.

You buy the stock for 3.73. You sell a 7.5 put at 3.6. If the stock goes to zero you have a loss of 3.73 on the stock and 3.90 on the put (the put is worth 7.5 and you sold it at 3.60). So the total loss is 7.63 or $763 per contract/100 shares.

If you buy a put then the put is covered when you also have long stock. If you sell (write) a put then the put is covered when you are also short the stock.

No, it doesn't work out 50:50. Markets tend to fall twice as fast as they rise (rule of thumb) so assuming the 15% holds you are looking at something more like 10% of the time the markets trend up and 5% trend down.

OK, I stand corrected. Thanks!

To write options you need a margin account. If you don't have it then you cannot write options, even if they are cash secured puts, you still need a margin account. To answer you intial question, if you are assigned and don't have enough money to cover the assignement then your broker will...

You don't need to create a special algo, there is already a whole bunch of different algos designed for different objectives, and all insitutional brokers have them. Of course there are times when not even an algo is enough, in which case it requires patience and, as previously pointed out...

You are missing the point. All options on futures are margined according to SPAN and this is what the brokers will give you.

SPY is an ETF, so unless you meet portfolio margining standards you won't get the margins you seek. However, you can use options on S&P emini futures (ES), which use SPAN margining.

You want to remain dollar neutral.

You have to be more specific about which options you trade? Equity, cash index, futures, commodity,...? All options on futures have SPAN margining. You can get portfolio margining on cash index options, but you must meet the broker requirements for it.

It doesn't make any difference as theta is minimal on DITM and DOTM options. Theta has a bell-shaped curve when you plot it against the strikes (moneyness).

You should've mentioned this right at the start. Obviously, it's possible to achieve such positions by legging in. So, yes, you do have a risk free position.

The dividends don't really matter in this case. Dividends are priced in. It could be non-standard options or that the prices you used are not real in terms of actually getting a fill.

If you can do it then it's a risk free trade, assuming you are not missing anything. However, my experience tells me that you are either missing some vital piece of information, which makes options look like they are mispriced or the prices you used are not achievable. By the way, it's not...

It's no different to buying them on SPY.