Liquidity tends to be bad as the primary traders are hedges against structured products and pure vol bets (2 year skew trades, etc).
Personally I never found trading vol that far out to be exciting, but others will disagree with me.
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Dec 2015
- Thread starter osho67
- Start date
Liquidity tends to be bad as the primary traders are hedges against structured products and pure vol bets (2 year skew trades, etc).
Personally I never found trading vol that far out to be exciting, but others will disagree with me.
Quote from newwurldmn:
What interest rate exposure is he taking?
its obviously such a small part of ones PNL , I realize there are other risks much higher.. But if interest rates go up.. The price of options do as well therefore putting a Condor way out on the calender at risk of going up in price... So a long condor is in a very small way short interest rate exposure.. Sorry i'm totally to oriented towards interest rates with the stuff i'm researching lately.. I know the vol level superseeds the interest rate risk by some large exponent
Quote from cdcaveman:
its obviously such a small part of ones PNL , I realize there are other risks much higher.. But if interest rates go up.. The price of options do as well therefore putting a Condor way out on the calender at risk of going up in price... So a long condor is in a very small way short interest rate exposure.. Sorry i'm totally to oriented towards interest rates with the stuff i'm researching lately.. I know the vol level superseeds the interest rate risk by some large exponent
That far out rates can be big, but not in an iron condor that is largely delta neutral.
Thanks for all the replies, Much appreciated,
Next day I put the same trade and guess what, It got filled at mid price within minutes.
I admit I donot know much about interest rates and some other implications of the trade. I was just amazed at very low margin required and the large amount of premium earned.
Obviously I am not well informed and to correct that I would like to read a good book on leaps options. Any suggestions much appreciated. Thanks so much
Next day I put the same trade and guess what, It got filled at mid price within minutes.
I admit I donot know much about interest rates and some other implications of the trade. I was just amazed at very low margin required and the large amount of premium earned.
Obviously I am not well informed and to correct that I would like to read a good book on leaps options. Any suggestions much appreciated. Thanks so much
Quote from osho67:
I tried to put up an iron condor in that date and and for the margin requirement of about 500 , I was getting in premium about 7500. (SPX) trade. But I waited and waited but the trade never got filled. I had put the trade at mid price and I reduced the premium I was getting but trade never filled. How to fill this type of trade?
Thanks
Do you mind sharing which strikes? I priced out a DEC 15 but it was 25 pts wide which is a much higher real risk and for only $2300. My margin on it was only $500 but real risk was $2500/
Quote from newwurldmn:
Liquidity tends to be bad as the primary traders are hedges against structured products and pure vol bets (2 year skew trades, etc).
Personally I never found trading vol that far out to be exciting, but others will disagree with me.
Why would anyone wanna trade vol out that far you think?
Quote from RichardRimes:
Do you mind sharing which strikes? I priced out a DEC 15 but it was 25 pts wide which is a much higher real risk and for only $2300. My margin on it was only $500 but real risk was $2500/ [/QUOTE
It was a paper trading a/c entry. I think the prices were call 1900/2000 and puts 1700/16600. Year 2015. Later on I closed that entry at a loss of $25 plus commission.
Please recommend a good book to read on LEAPS. Thanks
I can't recommend a good book on leaps. The only traders that I know of who trade leaps are doing for hedge reasons or are doing calendar spreads. Even that I don't know anyone who trades that far out....just too much risk and not enough reward. The most I go out is 3 months because my strat is kinda mean reverting with a positive bias (right now) .
What I've been told by x market makers is that the price of options that far out are priced high and essentially on a 100 pt spread you will pay more for your + option than you get (relatively) for your sell. If you look at actual buys and sells you will probably see only large lots (big boys hedging?) than the small (under 10)...retail. Just too much slippage and risk.
A book that helped me a lot was Natenbergs " volatility and Pricing".....I think I need to read again.
What I've been told by x market makers is that the price of options that far out are priced high and essentially on a 100 pt spread you will pay more for your + option than you get (relatively) for your sell. If you look at actual buys and sells you will probably see only large lots (big boys hedging?) than the small (under 10)...retail. Just too much slippage and risk.
A book that helped me a lot was Natenbergs " volatility and Pricing".....I think I need to read again.
Quote from osho67:
Quote from RichardRimes:
Do you mind sharing which strikes? I priced out a DEC 15 but it was 25 pts wide which is a much higher real risk and for only $2300. My margin on it was only $500 but real risk was $2500/ [/QUOTE
It was a paper trading a/c entry. I think the prices were call 1900/2000 and puts 1700/16600. Year 2015. Later on I closed that entry at a loss of $25 plus commission.
Please recommend a good book to read on LEAPS. Thanks
Ok that makes sense...your risking 2.5k to make 7.5k in two years. Strikes are aggressively skewed to the downside given the upside bias of the market. We are up this year by 400 or so pts this year? If you can afford to wait perhaps a good bet...however if market exceeds either strike by hundreds of points then your broker will raise your margin considerably ( that's the hidden risk)....so you must maintain a lot of cash in your account to avoid the dreaded margin call. Not a bad trade for an investor with a strong bias.