Interesting situation in an Option

Trajan,

Why would anyone bother with a trade that has zero risk (commissions) and has only upside?

Like I said above, if I _could_ put this spread trade on as described above, over 100 or 1000 underlyings, my expentancy for a profit over the space of all those trades, including comissions, would be ENORMOUS.

nitro
Quote from Trajan:

I don't understand this discussion. Why are you bothering the 10 call anyway? Is the stock short restricted? That ten call should for all intents and purposes be considred stock, IV does have a place in this discussion. Also, you shouldn't think of this as a bear call spread, it is buying the 20 put. It is, in essence by buying the 20 call and sell stock(the 10 call), a synthetic long put. You are attempting to do this for even money, or no risk. A very valid strategy by the way, I look for these myself. Hello has a couple of good points, why mess with the bid/ask spread on the 10 call? Second, it could very easily get exercised as MMs, last I heard, don't have short exemption on NYSE stocks and if already short the stock(and are ethical) are supposed to excercise the calls if they sell short on a downtick. The better idea would be to bid for the 20 calls on anticipation of a move higher than sell stock to make the deal a net credit. This takes some skill, but doable.

My trade would be to buy some 22.5s and sell the 20s at ratio of 20 to 7. Looking at the chart, i get the feeling it could break out of this one way or another, a backspread seems very appropriate although not sure about Sep. Maybe a ratio diagonal would be better, bid on the OCT 22c and sell the Sep 20 on a pop. The options don't look liquid enough to do this at attractive prices though.
More...
 
Instead of trying to leg into the 10/20 call spread for 10, why don't you try and leg into th3 15/20 call spread for 5 ? By selling the 15 strike instead of the 10 strike, you're selling more premium against the premium you're buying. Obviously you don't make any money under 15, but making 5 on the trade would still be huge. Just something to think about.

Vega:D
 
Quote from nitro:

Trajan,

Why would anyone bother with a trade that has zero risk (commissions) and has only upside?

Like I said above, if I _could_ put this spread trade on as described above, over 100 or 1000 underlyings, my expentancy for a profit over the space of all those trades, including comissions, would be ENORMOUS.

nitro
More...

Nitro,

Any professional would do this trade (if it existed without legging) as much as they could. The majority of the time, you would lose commissions (in the case of a professional like Metooxx it would be small), but the one little chance that the stock blows up, you will hit a home run.
 
Quote from vega:

Instead of trying to leg into the 10/20 call spread for 10, why don't you try and leg into th3 15/20 call spread for 5 ? By selling the 15 strike instead of the 10 strike, you're selling more premium against the premium you're buying. Obviously you don't make any money under 15, but making 5 on the trade would still be huge. Just something to think about.

Vega:D
More...

The selling the 10-20 call spread at 10 would be much more superior than selling the 15-20 call spread at 5. Between 15 and 20, both would yield the same amount of profit, but at 15 and below the 10-20 would provide much more profit than the 15-20 (the 15-20 is capped out at 15). Plus, if you do the 10-20 in size, the extra 5 points would generate a little bit more income from interest.
 
:D

I agree 100000000000%

If I could trade like metoo, I wouldn't hesistate for 1/1000000th of a second.

nitro :D
Quote from freehouse:



Nitro,

Any professional would do this trade (if it existed without legging) as much as they could. The majority of the time, you would lose commissions (in the case of a professional like Metooxx it would be small), but the one little chance that the stock blows up, you will hit a home run.
More...
 
.....are every trader's dream!!!!!!! Obviously if you can put on no risk trades, with huge profit potential you would do that as many times as your account allows you. The MMs are not going to give you a free lottery ticket, if you leg into the spread, then yes, you have no risk, but you're still taking the risk of legging into it, and even if you leg into the spread for less than 10, as long as the difference is less than the price of the 10/20 put spread, you've done a good job. And yes, I know that collecting interest on 10 will get you more interest than collecting on 5:p, no matter how much size you do. I was merely stating that you allow yourself a little more room for error on the leg by selling the additional premium in the 15 strike.

Vega:D
 
Vega,

Old news. You are rehashing what neospecialist said on page one of this thread.

nitro
Quote from vega:

.....are every trader's dream!!!!!!! Obviously if you can put on no risk trades, with huge profit potential you would do that as many times as your account allows you. The MMs are not going to give you a free lottery ticket, if you leg into the spread, then yes, you have no risk, but you're still taking the risk of legging into it, and even if you leg into the spread for less than 10, as long as the difference is less than the price of the 10/20 put spread, you've done a good job. And yes, I know that collecting interest on 10 will get you more interest than collecting on 5:p, no matter how much size you do. I was merely stating that you allow yourself a little more room for error on the leg by selling the additional premium in the 15 strike.

Vega:D
More...
 
Quote from freehouse:



The selling the 10-20 call spread at 10 would be much more superior than selling the 15-20 call spread at 5. Between 15 and 20, both would yield the same amount of profit, but at 15 and below the 10-20 would provide much more profit than the 15-20 (the 15-20 is capped out at 15). Plus, if you do the 10-20 in size, the extra 5 points would generate a little bit more income from interest.
More...

I don't think you guys understand. Please pardon me for the caps, but IT MAKES NO DIFFERENCE WHETHER YOU LEG INTO THE 10/20 CALL SPREAD FOR A TEN DOLLAR CREDIT OR BUY A 20 CALL AND SELL STOCK FOR ZERO OVER PARITY. You will profit the same either way(maybe more with the latter if the stock goes below 10) with EXACTLY THE SAME RISK PROFILE, in other words none, zilch, nada, but you will have lower commission costs(its cheaper to trade stock) and you will have a tighter spread on the BID/ASK. The bid on those 10 calls is below parity. Would you rather sell stock at 22.09 or 22? It doesn't mean you can't use the 10s as stock(pick off,order sitting in the book or maybe be bigger size); I use deep itms all the time, but it in this scenario stock looks better.
 
I would just like to add that you have the right idea, but just need to get down all the relationships and synthetics. Couple that with some creativity and options will seam a hell of a lot easier. Volatility, on the other hand, is more difficult, it will take a lot more work and experience.
 
I get it I get I get it!

I LOVE IT!!!!!

Thanks.

nitro ( very :cool: )
Quote from Trajan:



I don't think you guys understand. Please pardon me for the caps, but IT MAKES NO DIFFERENCE WHETHER YOU LEG INTO THE 10/20 CALL SPREAD FOR A TEN DOLLAR CREDIT OR BUY A 20 CALL AND SELL STOCK FOR ZERO OVER PARITY. You will profit the same either way(maybe more with the latter if the stock goes below 10) with EXACTLY THE SAME RISK PROFILE, in other words none, zilch, nada, but you will have lower commission costs(its cheaper to trade stock) and you will have a tighter spread on the BID/ASK. The bid on those 10 calls is below parity. Would you rather sell stock at 22.09 or 22? It doesn't mean you can't use the 10s as stock(pick off,order sitting in the book or maybe be bigger size); I use deep itms all the time, but it in this scenario stock looks better.
More...
 
You must log in or register to reply here.
Back
Top