European Option Risk

[AlphaLine]

Any insight on maintaining adequate risk levels on European Style Options from the sell side? (looking at Verticals). Thanks.

 

[newwurldmn]

Any insight on maintaining adequate risk levels on European Style Options from the sell side? (looking at Verticals). Thanks.

Same as American but easier: don't have to worry about physical assignment early.

 

[nazzdack]

----insight....
----maintaining adequate risk levels....
----European Style Options....
----sell side?

1) With European-style options, deep-in-the-money strike prices might sometimes appear to trade at a "discount" to "fair value", with respect to an American-style option, because of the inability to exercise early.
2) Some of the other "rocket scientists" in the forum may want to chime in on that "quirk".

 

[AlphaLine]

Thanks to both of you for the replies. I was under the impression that I could not adjust my positions prior to expiration which I just found that is wrong according to thinkorswim.

 

[Windlesham1]

you cannot exercise a European style option- they are usually cash settled anyway, but you can sell or buy them all day long -I trade UK options on the ftse index and sometimes take swing trades for 3-7 days-you can do whatever you like with zero risk of assignment or exercise-no idea why people trade stock options-you really need to be right on those puppies and most people fool themselves into thinking they are doing ok- there are only a few share options traded in the UK -it's a loser's game as sooner or later you get destroyed because the company lied about its profits