Buying/Selling Options

[El OchoCinco]

Bo:

you should start a journal thread of your interesting trades. I guarantee the input you will get here will be so much more useful than over there, with all due respect to those guys. People will ask questions, provide their own twists and morph the thread into an on going educational seminar for free...

highly recommmend since a lot of people would be interested in using collars for your shorts.

 

[Eliot Hosewater]

Quote from exQQQQseme:

Eliot, I'd really like that. But, just so you know, sure I really like them, but nobody should take me for an expert on the subject. Happy to discuss it but not at all interested in any sort of a debate whatsoever.

4Q

OK, I started a new thread - Reverse Collars.

 

[Wayne Gibbous]

Quote from MajorUrsa:


Did anyone hear the sense of joy in the writing by Kramer in the part about the new margin rules. I my mind I saw already thousands of new suckers who now want to learn from optionetics how to use collars to increase their profits overnight. Halleluja.

Ursa..

Does anyone else get the feeling that an account-destroying "perfect storm" is brewing?

Higher leverage, low volatility, no significant market moves for years, many newbies, Cramer, Kramer, booyuh, CNBC New Highs Hats, lots and lots of OTM index spreaders, thousands of new hedgie cowboys, etc, etc...

Keep the exposure low, guys. Boring, yes, but at least you won't have to start yet another "I Blew Out My Account" thread!

Good luck to all.

 

[exQQQQseme]

OK Coach and Eliot, I did a kick off posting in the Reverse Collar new thread. Let's see what happens.

4Q

 

[tower]

Quote from pcgeek86:

Unfortunately, my broker does not allow the selling of put options, so that is out of the question for the time being.

pcgeek86:

If your broker allows you to sell calls you can certainly sell puts - at least synthetically. (By that I mean that the return curve of a synthetic put will be identical to that of an actual put). If you sell a call and buy a future 1:1 you have sold a put - even if your broker doesn't know it.

To be fair, this is only literally true if the vol. curve is flat. If there is a call skew, you will get more juice for the synthetic (such as in ag. commodity options) and if there is a put skew, you will get less (as is the case for equity indexes).

 

[yip1997]

Quote from tower:

To be fair, this is only literally true if the vol. curve is flat. If there is a call skew, you will get more juice for the synthetic (such as in ag. commodity options) and if there is a put skew, you will get less (as is the case for equity indexes).

Tower,

Do you imply that covered call might have a return different from naked put because of the vol skew?

 

[MTE]

Quote from tower:

pcgeek86:

If your broker allows you to sell calls you can certainly sell puts - at least synthetically. (By that I mean that the return curve of a synthetic put will be identical to that of an actual put). If you sell a call and buy a future 1:1 you have sold a put - even if your broker doesn't know it.

To be fair, this is only literally true if the vol. curve is flat. If there is a call skew, you will get more juice for the synthetic (such as in ag. commodity options) and if there is a put skew, you will get less (as is the case for equity indexes).

The skew has nothing to do with this. Natural and synthetic use the same strike options, which by definition trade at the same Implied Volatility, otherwise there's an arb to be made.

 

[yip1997]

Quote from MTE:

The skew has nothing to do with this. Natural and synthetic use the same strike options, which by definition trade at the same Implied Volatility, otherwise there's an arb to be made.

MTE,

In reality the put and call with the same strike and same expiration might have different IV (if we use the mid of bid ask to calculate IV).

I talked to Scott in TOS regarding the possibility of software error in computing IV, and the answer was no.

I sometimes think there might be a better way of trading the synthetic.

The attached diagram shows different IVs for the call and put. The percentage column is the IV column. Lets see if we can find something.

 

[yip1997]

Quote from yip1997:

MTE,

In reality the put and call with the same strike and same expiration might have different IV (if we use the mid of bid ask to calculate IV).

I talked to Scott in TOS regarding the possibility of software error in computing IV, and the answer was no.

I sometimes think there might be a better way of trading the synthetic.

The attached diagram shows different IVs for the call and put. The percentage column is the IV column. Lets see if we can find something.

Here is the diagram.

 

[exQQQQseme]

PCgeek, check with your broker and see if you would be allowed t o write "covered puts". Most brokers who allow covered call writing allow covered put writing.

Covered Call Write: Purchase 100 shares of UNDerlying.
Write (Sell to Open): 1 Call for every 100 shares of stock owned.

Covered Put Write: Short 100 shares of UNDerlying.
Write (Sell to Open): 1 Put for every 100 shares of stock shorted.

Yes, I am aware that the former is a synthetic naked Put sale, and the latter is a synthetic naked Call sale. The purpose of this posting is merely to offer an idea to PCGeek to help him (or her) handle the broker's rule.