How do I close trades when there is no bid / ask

dagnyt · Aug 3, 2009

Quote from dmo:

Does IB have any floor access - any way to get a quote from the pit, and put an order into the pit?

Yes, for larger size orders. I did a few 50 lots, but they prefer 100 lots.

I also found them to provide awful results, at least with RUT options and no longer use them in this manner.

Mark

dagnyt · Aug 3, 2009

Quote from TheOptionsLab:

Close a short put by buying a call and shorting the underlying.

See Attached screen shot with rimm as example

comm and bid-ask will still cost you but at least you are neutral.

regards,

WHY take the pin risk?

Mark

nravo · Aug 3, 2009

Wouldn't I be losing the theta in the call, too, in addition to the price spread and commissions?

Thanks for the suggestion regardless; I knew there had to be a way to construct something close to a neutral offset, but my mind was elsewhere.

nravo · Aug 3, 2009

Quote from dagnyt:

WHY take the pin risk?

Mark

Sorry, I didn't get the screen shot, and what kind of call should I buy? ATM? ITM? My ITM options strikes are limited as this is an electronically traded futures option.

nravo · Aug 3, 2009

And now that I have the short puts trade hedged, how about a covered call that has a ITM call, suddenly? I'd rather close the trade, take a profit and eat a little remaining theta, than risk a whipsaw.

dagnyt · Aug 3, 2009

Quote from nravo:

And now that I have the short puts trade hedged, how about a covered call that has a ITM call, suddenly? I'd rather close the trade, take a profit and eat a little remaining theta, than risk a whipsaw.

A short put IS a covered call.
If you hedge one, you can hedge the other.

To hedge the covered call, buy the corresponding put - but that does give you pin risk.

Mark

nravo · Aug 5, 2009

Quote from dagnyt:

A short put IS a covered call.
If you hedge one, you can hedge the other.

To hedge the covered call, buy the corresponding put - but that does give you pin risk.

Mark

I'm still lost on this one. Let's say I am long 1 contract of XYZ, bought at 24, and sold a call with a 25 strike for 1.50, and now the contract, which expires in a month is at 50. I want to close now, take a big loss on the call and a bigger gain on the contract, probably net like 1.40. But there is no bid/ask now for the 25 strike on IB's access to the NYBOT electronic exchange.

You say I buy a put to lock in the hypothetical profit? What put? An OTM put, the 25 strike, the flip side of the call the option. Well, what if there is no bid/ask for that, either, just for the three or four strikes around ATM. And if I buy one of those it will eat up my profit on the trade. What am I missing here?

Similarly, what if I orginally sold a put with a 20 strike. It is now OTM with the contract trading at 50. But there os no bid-ask for puts (or calls) with a 20 strike any more. How do I lock in the profit?