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Generally, nobody would exercise an OTM option (excluding instances where the option is just barely OTM), however weird things have happened.

See here for contract adjustment notes.

It's a trade off - capped risk for lower reward. However, you can still lose months/years of profits. There's not right or wrong, it's a personal choice.

All future dividends (announced and expected) are priced in to all expiries and strikes.

It works until it doesn't and you end up losing years of profits and then some.

Ditto

Overall, you cannot have it both ways. A large stable stock with good dividends will have low premiums precisely because of those qualities. On a side note, unless you already own the stock you are better off writing cash-secured puts than covered calls.

It's not a "delta pin". These are two separate columns - delta and pin. In the "pin" column there is a little lock icon. When you lock it then that particular spread stays at the top when you sort the data.

I'd call it ping pong. :)

I'm not talking about absolute return, I'm talking about (P2/P1)-1. For example, if yesterday crude closed at 76 and today it closed at 78 (I'm making up the numbers), then the return is (78/76)-1=0.0263 or 2.63%. However, instead of the above you may wanna use the natural log to calculate...

As you get closer to expiration and your calendar is in the sweet spot your main risk comes from gamma and not from vega/volatility.

What's wrong with buying a put? Afterall, you have adivsed the person sells a put using 2 trades/legs instead of one.

You don't need the point value. You just calculate the daily (or whichever period you like) returns from the price of each contract and then run the correlation. The absolute value is completely irrelevant.

I think CBOE has one, so does Thinkorswim and Optionsxpress.

You should use returns to estimate correlation and not the actual price.

I second that! Very nice site and has a lot of links to other great ones! :)

When you say you've been doing this lately. What's the exact timeframe you have in mind? The reason I ask is that the markets have been very well behaved in the last month or so with respect to rangebound strategies, so my "concern" is that you think you have found the "edge", but as soon as...

The stock drops by the amount of the dividend on the ex-div date, so to a shareholder a dividend is the same as taking money from one pocket and then putting it into the other. There's no workable twist! There's no free money here. The fact that you buy the stock on margin is completely...

You are missing my point. It doesn't matter which spread you use. I just gave you an example. The point is that you cannot have insurance without giving something up for it. There's no free lunch. As to what you give up depends on the hedge. It can be an outright cost, a cap on your potential...

The DIWLH is the normal one that expires on the Saturday following the 3rd Friday of Dec. The IQXLH is the quarterly one that expires at the end of the month.