No. Because you can close your position. Your options will be trading at parity!!!!!! You understand that right? In other words, there is no advantage to holding a position that is trading at parity with the underlying. With cash though, the options are trading well over parity. So you either buy them back at a huge premium or take a risk on settlement.
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iron condor
- Thread starter osho67
- Start date
No. Because you can close your position. Your options will be trading at parity!!!!!! You understand that right? In other words, there is no advantage to holding a position that is trading at parity with the underlying. With cash though, the options are trading well over parity. So you either buy them back at a huge premium or take a risk on settlement.
Too much work, I prefer selling Iron Buttplugs.
Sell 1 OTM Call
Sell 1 OTM Put
Sell 1 OTM Call
Sell 1 OTM Put
Quote from Maverick74:
No. Because you can close your position. Your options will be trading at parity!!!!!! You understand that right? In other words, there is no advantage to holding a position that is trading at parity with the underlying. With cash though, the options are trading well over parity. So you either buy them back at a huge premium or take a risk on settlement.
i guess i really don't understand you. we know that rut is about 10 times larger than iwm. with the same investment, holding either iwm or rut options until expiration to me is the same. on one hand there is the settlement risk on friday or there is assignment risk with iwm on the following monday. either day there is an equal risk of the market moving dramatically up or down. final trading day is thurday before the friday on rut so you can also close positions. now, i've never settled in the money nor have i been assigned, its just not a good idea to have postions any place near your shorts.
maybe someone else can chime in to clarify what i am missing. spindr0?
Quote from daveyc:
i guess i really don't understand you. we know that rut is about 10 times larger than iwm. with the same investment, holding either iwm or rut options until expiration to me is the same. on one hand there is the settlement risk on friday or there is assignment risk with iwm on the following monday. either day there is an equal risk of the market moving dramatically up or down. final trading day is thurday before the friday on rut so you can also close positions. now, i've never settled in the money nor have i been assigned, its just not a good idea to have postions any place near your shorts.
maybe someone else can chime in to clarify what i am missing. spindr0?
They are not the same. They are two completely different products. There is no expiration risk on IWM. I don't know why you keep saying this. You are implying that if one simply allows one to exercise into them and now you have an underlying position then the following day you have risk. Yes, but one, why would you not buy back your IWM options? They are trading at parity. I don't understand this. When something is trading at parity, it means it's moving one for one with the underlying. For example, say IWM is 85.50 and I'm short the Feb 85 calls. They will probably be .49 bid at .51 offer Friday at expiration. Why the hell would you hold this position over the weekend!!!!!! Just pay the .51. They are trading at parity.
This has nothing to do with the size of the contract. The RUT calls will NOT be trading at parity on Thursday before settlement. That much I can guarantee you. So either you will buy back those calls OVER parity or you will assume the risk of settlement. This is not that hard to understand. It's very simple math.
I don't know if I can add much to Maverick's explanation.
With the ETF, something just OTM at expiry will expire. If ITM, it trades at parity. No risk premium left. Yes, if assigned, there's Monday AM directional risk but there's no settlement surprise.
With cash settled, you don't know where that will be and how far away it may be from where the actual index trades. A.M SUPPRISE !!
With the ETF, something just OTM at expiry will expire. If ITM, it trades at parity. No risk premium left. Yes, if assigned, there's Monday AM directional risk but there's no settlement surprise.
With cash settled, you don't know where that will be and how far away it may be from where the actual index trades. A.M SUPPRISE !!
Quote from spindr0:
I don't know if I can add much to Maverick's explanation.
With the ETF, something just OTM at expiry will expire. If ITM, it trades at parity. No risk premium left. Yes, if assigned, there's Monday AM directional risk but there's no settlement surprise.
With cash settled, you don't know where that will be and how far away it may be from where the actual index trades. A.M SUPPRISE !!
thank you for that. so its settlement surprise versus monday am directional risk. so i dont know where the strong disagreement came from or what but i will reread the posts. thanks spindr0.
Quote from daveyc:
thank you for that. so its settlement surprise versus monday am directional risk. so i dont know where the strong disagreement came from or what but i will reread the posts. thanks spindr0.
No. LOL. Dave, capadre, listen to me. You are not getting this. There is no "directional" risk. I cannot get my head around this why you keep saying this. IWM options expire on expiration Friday right. At the close right? Why do you keep insisting of holding them over the weekend? This is a totally different trade. As far as I'm concerned you are initiating a new trade on Monday which is either long or short the market. your option trade is OVER on Friday. Why are you not buying back the IWM calls? See, the issue here is you don't have the same optionality (pun intended) with the RUT. Because the RUT options will NOT be trading at parity. So you either buy them back well over parity or you hold them into settlement. These are two completely different trades.
Quote from Maverick74:
No. LOL. Dave, capadre, listen to me. You are not getting this. There is no "directional" risk. I cannot get my head around this why you keep saying this. IWM options expire on expiration Friday right. At the close right? Why do you keep insisting of holding them over the weekend? This is a totally different trade. As far as I'm concerned you are initiating a new trade on Monday which is either long or short the market. your option trade is OVER on Friday. Why are you not buying back the IWM calls? See, the issue here is you don't have the same optionality (pun intended) with the RUT. Because the RUT options will NOT be trading at parity. So you either buy them back well over parity or you hold them into settlement. These are two completely different trades.
maverick, ofcourse! perhaps i am not using the correct verbage. i know the options on iwm expire on the friday. i never said that i would be holding options over the weekend lol. where do you see that? my point was you would be assigned if you hold those in the money shorts after friday, you are either long or short the eft on monday. geez i hope that is over.
Quote from Maverick74:
No. LOL. Dave, capadre, listen to me. You are not getting this. There is no "directional" risk. I cannot get my head around this why you keep saying this. IWM options expire on expiration Friday right. At the close right? Why do you keep insisting of holding them over the weekend? This is a totally different trade. As far as I'm concerned you are initiating a new trade on Monday which is either long or short the market. your option trade is OVER on Friday. Why are you not buying back the IWM calls? See, the issue here is you don't have the same optionality (pun intended) with the RUT. Because the RUT options will NOT be trading at parity. So you either buy them back well over parity or you hold them into settlement. These are two completely different trades.
OK, let me try to even further add to this. When I say the options are trading at parity, that means there is no juice on them. It's all intrinsic value. So if they are in the money, there is nothing to be gained from holding them into the weekend. Now, one could make the argument if there was juice on them. Say you are short the Feb 55 calls and IWM is trading at 54.98 and the calls are offered at .10. Then that is juice. By not exercising you are hoping to capture that .10. But we are not talking about that. If the 55 calls are trading for .50 with IWM at 55.50, there is no advantage to holding the calls and getting exercised unless you WANT the directional risk. In other words, you are suddenly putting on a new trade that says, I WANT to be short. But that is irrelevant to this conversation.