Explain to me how Oanda's "box options" are not a giant ripoff

Quote from 1a2b3cppp:

are you saying if you're making a horizontal box to make it as short (height) as possible because if price is going to touch, say, 100 from below, it doesn't matter if the box goes from 100 to 150 or from 100 to 110 because it's still going to touch at 100?

Unless it's gonna go way above and then drop in from above, in which case height might matter.
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Did you compare it to twice the delta of the vanilla at strike=touch price?
 
Quote from Maverick74:

It was a real account. The vig is not that high. Look, a touch is much more expensive then a vanilla option. That's the first point to understand. When volatility increases it has an exponential effect on pricing, the relationship is not linear. So the higher the implied vol, the touch becomes dramatically more expensive. So if you were using vanilla options to make a comparison to calculate the vig, they are not going to be remotely close. The closer vol is to zero, the closer the relationship between the vanilla and the exotic. The higher the vol, the wider apart they will be and exponentially so.
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I was calculating the vig not based on my knowledge of options (it's small), but based on the difference in pricing from buying/selling the same option. It was astronomical. I.E. if the box is touched (selling out of money option), recieve $40. If buying assuming box will be touched, (same box), pay $150.
 
Quote from NY0BScalper:

I was calculating the vig not based on my knowledge of options (it's small), but based on the difference in pricing from buying/selling the same option. It was astronomical. I.E. if the box is touched (selling out of money option), recieve $40. If buying assuming box will be touched, (same box), pay $150.
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That's not the right way to look at it. You need to measure the payoff. What is the risk/reward. If you pay 150 for the box, what is the payoff? How much are you risking to make 40 on the box?
 
Quote from NY0BScalper:

I was calculating the vig not based on my knowledge of options (it's small), but based on the difference in pricing from buying/selling the same option. It was astronomical. I.E. if the box is touched (selling out of money option), recieve $40. If buying assuming box will be touched, (same box), pay $150.
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You have to calculate the expectancy via touch prob or expiration prob(1/2 PoT) -- dependent on whether you're trading a touch exotic or synthetic Euro barrier (otm duration/horizontal bet vs. itm Px/vertical bet)
 
I'm gonna be honest, I don't even know what half those words mean.

Can you just post a screenshot of a favorable setup or something? :D
 
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