any option sellers

[crayon851]

oh! okay that makes sense. Do you have any suggestions on how I could have made that trade better? or something you'd have done different?


So paying $0.50 to make $1. is the risk one to make one.

The other thing that I wonder about is the sell on high vol and buy on low vol rules. If vol his high, then all options values are higher and vice versa? so, in the example of selling credit with limited risk, doesn't this theoretically make the ratio of value the same in high and low vol times? For instance, if if you're selling a call in high vol times to receive more credit, you're also having to buy a call whose value is inflated due to high volatility also. Doesn't this offset the gains and make the ratio of profits/risk the same in any vol condition . unless you're legging into positions.

And with put call parity, from what I understand is, all greeks will be the same between the two types and will differ by strike prices. i.e a put call with 10 strike will have the same greeks, a 9 put and call will have a different set of greeks and etc. With every strike OTM the greeks will decrease equally on both sides.

So, in my BBRY trade, I'm assuming the greeks would look something like the following

Long call 9, vega would be less than the short 10 call.

With that said, if BBRY continues to go up, that would lead to decrease in vol, meaning the long call would decrease slower than the short 10 call as vol contracts.

is this the correct understanding?

also, that still suggests to me that credit spreads are actually than debits because you can realize a greater portion of the profits sooner. You might make less, but if you're consistently making smaller profits more frequently, the volume should give higher profits overall.

 

[Martinghoul]

There's nothing about a trade like this that can be made "better" or "different". You're expressing a directional view. Ultimately, it only makes sense to do this trade if you really disagree with the distribution of probabilities implied by the mkt price. As an exaggerated example, if I told you that this spread is bid at $1, you'd probably be a seller all day long, since this would imply that BBRY is 100% guaranteed to be above $10 at expiry. If it were offered at 0, you'd be a buyer, since such a price implies that BBRY is 100% guaranteed to be below $9 at expiry.

The buying low vol/selling high vol "rule of thumb" sorta kinda works for spreads, but it can and does get a bit more complicated, since you obviously have another dimension to consider.

As to the greeks and for more general benefit, what you need to do is put together a little Excel sheet that can show you all these things and how they change.

I have absolutely no idea whether vol will decrease as BBRY goes up. I see no reason why that's necessarily going to be the case.

Finally, the debit vs credit spreads, the really is no distinction, in light of what I have written above. No one strategy is better than another strategy. Everything depends on the prices and the view.

 

[zdreg]

oh! okay that makes sense. Do you have any suggestions on how I could have made that trade better? or something you'd have done different?


So paying $0.50 to make $1. is the risk one to make one.

The other thing that I wonder about is the sell on high vol and buy on low vol rules. If vol his high, then all options values are higher and vice versa? so, in the example of selling credit with limited risk, doesn't this theoretically make the ratio of value the same in high and low vol times? For instance, if if you're selling a call in high vol times to receive more credit, you're also having to buy a call whose value is inflated due to high volatility also. Doesn't this offset the gains and make the ratio of profits/risk the same in any vol condition . unless you're legging into positions.

And with put call parity, from what I understand is, all greeks will be the same between the two types and will differ by strike prices. i.e a put call with 10 strike will have the same greeks, a 9 put and call will have a different set of greeks and etc. With every strike OTM the greeks will decrease equally on both sides.

So, in my BBRY trade, I'm assuming the greeks would look something like the following

Long call 9, vega would be less than the short 10 call.

With that said, if BBRY continues to go up, that would lead to decrease in vol, meaning the long call would decrease slower than the short 10 call as vol contracts.

is this the correct understanding?

also, that still suggests to me that credit spreads are actually than debits because you can realize a greater portion of the profits sooner. You might make less, but if you're consistently making smaller pr

_________________

it is not ok because you could not make a simple calculation. you owe new... an apology. he was spot on. not only do you not know the basics but you therefore don't have the ability to present a clear cut answer to your own original question.

 

[newwurldmn]

it is not ok because you could not make a simple calculation. you owe new... an apology. he was spot on. not only do you not know the basics but you therefore don't have the ability to present a clear cut answer to your own original question.

The guy's a bozo. He talks about trading credit spreads vs naked straddles, then asks some nonsensical question about debit spreads. it was my mistake for actually reading his posts and thinking that he might lack confidence with different structures (like someone who won't buy a call but will buy stock and put 1up).

I offer him genuine advice on a methodical way to learn options and he lambasts me.

I'm done with him. Hopefully other people will continue to help him with his learning.

 

[luisHK]

"You spend a lot of time on volatility forecasting. You should spend some time on understanding basic options concepts and put-call parity.

A debit spread is equivalent to a credit spread. A call credit spread is a put debit spread. "

the above is what you call condescending?

no wonder far East nations' education systems are outpacing the US and the russians treat obama like a kid.

lol !

 

[zdreg]

lol !

the US needs manifest destiny badly now.

 

[crayon851]

oh! okay that makes sense. Do you have any suggestions on how I could have made that trade better? or something you'd have done different?


So paying $0.50 to make $1. is the risk one to make one.

The other thing that I wonder about is the sell on high vol and buy on low vol rules. If vol his high, then all options values are higher and vice versa? so, in the example of selling credit with limited risk, doesn't this theoretically make the ratio of value the same in high and low vol times? For instance, if if you're selling a call in high vol times to receive more credit, you're also having to buy a call whose value is inflated due to high volatility also. Doesn't this offset the gains and make the ratio of profits/risk the same in any vol condition . unless you're legging into positions.

And with put call parity, from what I understand is, all greeks will be the same between the two types and will differ by strike prices. i.e a put call with 10 strike will have the same greeks, a 9 put and call will have a different set of greeks and etc. With every strike OTM the greeks will decrease equally on both sides.

So, in my BBRY trade, I'm assuming the greeks would look something like the following

Long call 9, vega would be less than the short 10 call.

With that said, if BBRY continues to go up, that would lead to decrease in vol, meaning the long call would decrease slower than the short 10 call as vol contracts.

is this the correct understanding?

also, that still suggests to me that credit spreads are actually than debits because you can realize a greater portion of the profits sooner. You might make less, but if you're consistently making smaller pr

_________________

it is not ok because you could not make a simple calculation. you owe new... an apology. he was spot on. not only do you not know the basics but you therefore don't have the ability to present a clear cut answer to your own original question.

Sure I'm still new and am learning. I don't deny that. However, I asked a question, which was not answered. Instead was given the run around. That is condescending. Lets see how you react the next time you ask someone for directions and they tell you to go look around before asking for help.

Since you two are more experienced, you couldve easily answered the question and then suggested I look at specific material to help learn. However you did not. That is what condescending people do. They provide snide responses.

 

[crayon851]

oh! okay that makes sense. Do you have any suggestions on how I could have made that trade better? or something you'd have done different?


So paying $0.50 to make $1. is the risk one to make one.

The other thing that I wonder about is the sell on high vol and buy on low vol rules. If vol his high, then all options values are higher and vice versa? so, in the example of selling credit with limited risk, doesn't this theoretically make the ratio of value the same in high and low vol times? For instance, if if you're selling a call in high vol times to receive more credit, you're also having to buy a call whose value is inflated due to high volatility also. Doesn't this offset the gains and make the ratio of profits/risk the same in any vol condition . unless you're legging into positions.

And with put call parity, from what I understand is, all greeks will be the same between the two types and will differ by strike prices. i.e a put call with 10 strike will have the same greeks, a 9 put and call will have a different set of greeks and etc. With every strike OTM the greeks will decrease equally on both sides.

So, in my BBRY trade, I'm assuming the greeks would look something like the following

Long call 9, vega would be less than the short 10 call.

With that said, if BBRY continues to go up, that would lead to decrease in vol, meaning the long call would decrease slower than the short 10 call as vol contracts.

is this the correct understanding?

also, that still suggests to me that credit spreads are actually than debits because you can realize a greater portion of the profits sooner. You might make less, but if you're consistently making smaller pr

_________________

it is not ok because you could not make a simple calculation. you owe new... an apology. he was spot on. not only do you not know the basics but you therefore don't have the ability to present a clear cut answer to your own original question.

This is my question:

For debit spreads, do you have to exercise the options i.e take stock for a time period to profit? or are you able to close them before hand for a profit?


The question was meant to ask that, if you have an ITM call debit spread at expiration, when the value is fully realized, do you have to manually exercise the long call and buy the shares and then let the short call get assigned on the day of expiration to full profit? Or can you close the position before expiration and gain a profit in some way.

To further that, does that happen on the day of and you see shares in your account and taken from your account? or does the exchange happen at the end of the day and the change in your account appears on the monday.

If someone could answer that, that would be great. thanks.

Telling me to look up put call parity doesn't answer that.

 

[zdreg]

hu·bris
[hyoo-bris, hoo-] Show IPA
noun
excessive pride or self-confidence; arrogance.

ig·no·rance
ˈignərəns/
noun
noun: ignorance

1.
lack of knowledge or information.
"he acted in ignorance of basic procedures"
synonyms: incomprehension of, unawareness of, unconsciousness of, unfamiliarity with, inexperience with, lack of knowledge about, lack of information about;

par·a·sitic
[par-uh-sahyt] Show IPA
noun
1.
an organism that lives on or in an organism of another species, known as the host, from the body of which it obtains nutriment.
2.
a person who receives support, advantage, or the like, from another or others without giving any useful or proper return, as one who lives on the hospitality of others.

 

[crayon851]

congratulations on being able to spell and stating the obvious of everyone's interaction at one point or another on the site and in life.