Good "european style" options to avoid early exercize?

D

darp

Hi,

I like deep in the money calendar spreads, as the cost can be tiny and if it goes your way big payoff.

The #1 problem is early exercise. I just got 30 Sept DIA options early exercised on me, thus have 3000 DIA I do not work. With European style options they can not be exercised early, they always settle at expiration.

My preference is ones that trade in USA, and have found out Chicago SP500 future options are European style, so one good one found.

Are all commodity options European style?

Would be most appreciative if option traders can point me to low bid ask spread liquid options that are European style. Or any other ideas to avoid early exercise on deep in the money options.

Thanks

Darp
 
Quote from darp:

Hi,

I like deep in the money calendar spreads, as the cost can be tiny and if it goes your way big payoff.

The #1 problem is early exercise. I just got 30 Sept DIA options early exercised on me, thus have 3000 DIA I do not work. With European style options they can not be exercised early, they always settle at expiration.

My preference is ones that trade in USA, and have found out Chicago SP500 future options are European style, so one good one found.

Are all commodity options European style?

Would be most appreciative if option traders can point me to low bid ask spread liquid options that are European style. Or any other ideas to avoid early exercise on deep in the money options.

Thanks

Darp
More...

Why don't you use the deep OTM equivalent!? A deep ITM call calendar is synthetically equivalent to a deep OTM put calendar and vice versa.

To see whether a particular option is American or European you'll have to check contract specs.
 
Quote from darp:


My preference is ones that trade in USA,
More...
Why is that if I may ask. One simple solution would be to trade European options, since they are nearly all, well, European...

Ursa..
 
"Why don't you use the deep OTM equivalent!? A deep ITM call calendar is synthetically equivalent to a deep OTM put calendar and vice versa.

To see whether a particular option is American or European you'll have to check contract specs."


Darp Answer: It would have same problem (early exercize) plus it gains value on drop in price, whereas Put Cal loses value on drop in price. Thanks for your comment
 
Why is that if I may ask. One simple solution would be to trade European options, since they are nearly all, well, European...

Ursa..

Darp: I found what was looking for. All options on CBOE are European style (SPX, RUT etc.) Plus found out that "Broad based equity Options" which means more that 10 stocks in an index option, get 60% Long Term Cap treatment even if you day trade them!!

That even applies to SPY (non Futures options that are broad based indexs). Wow does that help on taxes.

Cheers
 
Quote from darp:

"Why don't you use the deep OTM equivalent!? A deep ITM call calendar is synthetically equivalent to a deep OTM put calendar and vice versa.

To see whether a particular option is American or European you'll have to check contract specs."


Darp Answer: It would have same problem (early exercize) plus it gains value on drop in price, whereas Put Cal loses value on drop in price. Thanks for your comment
More...

Since when do OTM options have early exercise risk?:confused:

I suggest you review synthetics before commenting on my answer.
 
Since when do OTM options have early exercise risk?

I suggest you review synthetics before commenting on my answer.

Darp: I misread your post, thought you said ITM. Yes if you can get the same value it is equivalent, bit often the Bid/ask is worse to get in, as almost worthless. But will look into it more.

Thanks
 
"Since when do OTM options have early exercise risk?

I suggest you review synthetics before commenting on my answer.

Darp: I misread your post, thought you said ITM. Yes if you can get the same value it is equivalent, bit often the Bid/ask is worse to get in, as almost worthless. But will look into it more.

Thanks"

More Info: Looking at ECA 75 Mar Long to Oct short, the cost is .30 with DITM Puts and .70 with OTM Calls. What I guessed, but with no Early Exercize to worry about a "option" to look at (no pun intended).

Another alternative is just going Long the 75 Mar Calls and buying less.

The thing that attracted me to the DITMs Calendars is the low B/A spread.

My objective is to protect as cheaply as possible another strategy whose only downside is a big move up.
 
Quote from darp:

"Since when do OTM options have early exercise risk?

I suggest you review synthetics before commenting on my answer.

Darp: I misread your post, thought you said ITM. Yes if you can get the same value it is equivalent, bit often the Bid/ask is worse to get in, as almost worthless. But will look into it more.

Thanks"

More Info: Looking at ECA 75 Mar Long to Oct short, the cost is .30 with DITM Puts and .70 with OTM Calls. What I guessed, but with no Early Exercize to worry about a "option" to look at (no pun intended).

Another alternative is just going Long the 75 Mar Calls and buying less.

The thing that attracted me to the DITMs Calendars is the low B/A spread.

My objective is to protect as cheaply as possible another strategy whose only downside is a big move up.
More...

The call calendar is more expensive due to the cost of carry priced in.

By the way, I don't see Mar expiry on ECA. It has Aug, Sep, Oct and then the Jan's.

I'm not sure what exactly you are trying to achieve?
 
You must log in or register to reply here.
Back
Top