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Euro FX Short Strangle
- Thread starter Prevail
- Start date
Prevail,
Do you have a specific price close to the strike (118) where you will hedge/cover? Or is it a case of evaluating the market on the fly?
Having looked at the prices a week ago and looking now there doesn't seem to be much change (.0009x.0014 on IB with EUR at 1.1987). I guess the theta has offset whatever delta and IV moves have occurred.
Thanks,
Sam
Do you have a specific price close to the strike (118) where you will hedge/cover? Or is it a case of evaluating the market on the fly?
Having looked at the prices a week ago and looking now there doesn't seem to be much change (.0009x.0014 on IB with EUR at 1.1987). I guess the theta has offset whatever delta and IV moves have occurred.
Thanks,
Sam
Thanks for the question. As of the close of yesterday at the cme (not sure about IB) I'm showing the puts worth .00035 and the calls worth .00005/cab. This translates to the trade being worth $50, a profit of $200 not including commissions.
Some of this will be given back after today's sell off. Right now the stop is the strike, if it hits it, we buy it back.
Some of this will be given back after today's sell off. Right now the stop is the strike, if it hits it, we buy it back.
Quite puzzled about the IB quotes...especially compared to the pit options shown on the CME site -- @ .0130.
However, I am also puzzled about your position. Can you show me where I am going wrong...
I thought you had a 20 tick credit on the strangle -- @$250 as you say. The call is going to go out worthless that is pretty obvious.
If the put is worth .0035 (35 ticks right?) and you wanted to close it out now for some reason wouldn't you be out 15 ticks net?
Thanks for any help...
However, I am also puzzled about your position. Can you show me where I am going wrong...
I thought you had a 20 tick credit on the strangle -- @$250 as you say. The call is going to go out worthless that is pretty obvious.
If the put is worth .0035 (35 ticks right?) and you wanted to close it out now for some reason wouldn't you be out 15 ticks net?
Thanks for any help...
Thats 3.5 ticks (3.5 x 12.5 = $43.75) not 35 ticks. Today the put closed at 13 or $162.50.
Quote from ssternlight:
Quite puzzled about the IB quotes...especially compared to the pit options shown on the CME site -- @ .0130.
However, I am also puzzled about your position. Can you show me where I am going wrong...
I thought you had a 20 tick credit on the strangle -- @$250 as you say. The call is going to go out worthless that is pretty obvious.
If the put is worth .0035 (35 ticks right?) and you wanted to close it out now for some reason wouldn't you be out 15 ticks net?
Thanks for any help...
Hi ss, as jay said the puts closed at 13 and as you said the trade's credit was 20. Still profitable but if it gets stopped out soon it will be a losing trade.
incidentally, for those of you observing the options movement with me, the premiums seem to drop off rapidly the further out of the money the strikes are. While this is not unusual, and characteristic of options, it appears much more pronounced than the sp for example.
As many of us know, sp puts are often worth twice the value of calls when otm. When looking at the eurofx option prices I would probably conclude it is like looking at the sp with call prices on either side instead of put prices on either side, since they appear comparable. This is a punctuation of another point, however, and it illustrates how completely over valued index put prices are.
If otm options are underpriced in any capacity then risk is not being compensated for and long strangles would be more beneficial over the long term, even if the win rate is less than 30%. It would be difficult to trade psychologically though. At this time I still feel the strangle writer has the edge and will continue to test with single contract sizes.
Any input from fx options traders, on or off exchange, is appreciated.
incidentally, for those of you observing the options movement with me, the premiums seem to drop off rapidly the further out of the money the strikes are. While this is not unusual, and characteristic of options, it appears much more pronounced than the sp for example.
As many of us know, sp puts are often worth twice the value of calls when otm. When looking at the eurofx option prices I would probably conclude it is like looking at the sp with call prices on either side instead of put prices on either side, since they appear comparable. This is a punctuation of another point, however, and it illustrates how completely over valued index put prices are.
If otm options are underpriced in any capacity then risk is not being compensated for and long strangles would be more beneficial over the long term, even if the win rate is less than 30%. It would be difficult to trade psychologically though. At this time I still feel the strangle writer has the edge and will continue to test with single contract sizes.
Any input from fx options traders, on or off exchange, is appreciated.
Quote from Prevail:
I just set up my first fx options trade at the cme to feel things out.
Sold the July 118p x 126.5c for 20 tics. $12.5/tic.
Margin to set up this trade is around $900.
Premium generated is $250.
Not including expenses, return on initial margin is 27% with 15 week days left until expiration.
Anyone else making options trades on fx at the cme?
I work there