OddTrader plays ES Collars for vacationers

Quote from OddTrader:

Of course you can use verticals if you prefer to.

Anyway here is a short answer.

My guess is most vacationers alike would simply want to know whether the direction of the underlying is right or wrong by how many points for the trade.

This type of investors would think the bought/sold options associated with the underlying are basically peripherals (to the underlying).

Constantly checking the prices of associated options (or even learning complicate options or various verticals strategies) would be too much for them sometimes.
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The collar adds complexity, as you're trading a three way over a two way. Edge loss and additional commissions are not comforting for anyone.
 
sonsQuote from atticus:

The collar adds complexity, as you're trading a three way over a two way. Edge loss and additional commissions are not comforting for anyone.
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When trading every short timeframe, obviously a 2 legs strategy is the better choice than a 3 legs.

However, there are sevearl other reasons using 3 legs. One of them is liquidity and spread/cost for when the long options becoming deep ITM during the holidaying week for vacationers.

You are welcome to start a new thread to discuss the topic of synthetics (2 legs) vs outright (one leg), or collars (3 legs) vs verticals (2 legs). This same old topic has been discussed in length many times on ET before.

Such as: http://www.elitetrader.com/vb/showthread.php?s=&threadid=84028&perpage=40&pagenumber=3
Quote from atticus:

I assume it would be traded the same as a long put vertical, no?
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Quote from OddTrader:

Week 24Jan2011 Short 1280.21
Sold ATM Put at 19.22
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are you still short the call and long the cash? If I'm following right your position right now is

-1 1285 call (Feb)@21.47
-1 1280 put (Feb) @19.22
+1 Mar ES cash bto 1286.25

is this correct or did you close the cash?
 
Quote from OddTrader:

There are many different structures of Collar strategy that I am currently exploring:
- Long UL, Sell ATM put & Buy OTM call;
- Long UL, Sell ATM call & Buy OTM put;
- Long UL, Sell OTM call & Buy ATM put;
- Long UL, Sell OTM call & Buy OTM put;
- Long UL, Sell OTM calll & Buy ITM put;
- Long 100% UL, Sell 50% OTM call & Buy 100% OTM put;
- etc;

You can pick whichever collar strategy (and your preferred strike prices) you like.
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Curious as to why you would ever go long futures and long the risk-reversal (option 1)? IOW, why double up when the point is to carry a hard-stop? You seem pretty new to this, so I wonder why the interest in such a limited strategy (in terms of r/r)?

I was on vacation in Martinique and I don't think I would have been very comfortable doubling-up on ES and leaving my laptop at home.

You're not very open to questions, so feel free to pass this one by.
 
Quote from atticus:

Curious as to why you would ever go long futures and long the risk-reversal (option 1)? IOW, why double up when the point is to carry a hard-stop? You seem pretty new to this, so I wonder why the interest in such a limited strategy (in terms of r/r)?

I was on vacation in Martinique and I don't think I would have been very comfortable doubling-up on ES and leaving my laptop at home.

You're not very open to questions, so feel free to pass this one by.
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If you really want to learn how to trade options, go to ask RiskArb for good lessons. Not from me.

http://www.elitetrader.com/vb/showthread.php?s=&postid=1477416&highlight=RiskARb#post1477416

Quote from atticus:

I promise this will be my last on this thread. I realize it's difficult to post in real-time and trade. I don't trade this frequency.

I don't doubt your intentions to get short.

I took issue with your presumption that you're suited to tell someone how to trade -- on their journal.

riskarb out.
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lol, as expected. I was not telling you how to trade. A collar is a tacit-hedge, the long spot/long r/r is not. Good luck with the vacation trades.
 
Quote from OddTrader:

Specification of ES futures and futures options:

http://www.cmegroup.com/trading/equity-index/files/SxP500_FC.pdf
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http://www.interactivebrokers.com/en/p.php?f=productsEdu&p=f&ib_entity=llc#exercise

Q
Cash-Settled Contracts E-Mini S&P 500 Futures Contracts and the E-Mini S&P 500 Options Contracts for the quarterly contract months (Mar, Jun, Sept and Dec) are settled in cash which means that there is no delivery of the individual stocks in the case of the futures contract or in the case of the Option Contract, there is no delivery of the underlying Futures Contract. E-Mini Futures Contracts are settled in cash using a Special Opening Quotation, on the morning of the third Friday of the quarterly contract month. The Special Opening Quotation is based on the opening prices of the underlying component stocks in the S&P 500 Index, or on the last sale price of a stock that does not open for trading on the regularly scheduled day of final settlement. For the serial E-Mini Options Contract months (i.e. Jan, Feb, Apr, etc.), the E-Mini Option settles into the underlying E-Mini S&P 500 Futures Contract.
UQ
 
Quote from RichardRimes:

are you still short the call and long the cash? If I'm following right your position right now is

-1 1285 call (Feb)@21.47
-1 1280 put (Feb) @19.22
+1 Mar ES cash bto 1286.25

is this correct or did you close the cash?
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we all know what the spec's are ( I have lived them) assuming the above position......close of trading FEB exp... IF ES is 1180 THEN

the call expires
1289 ES put will convert to a long Mar ES cash and your account will have $5000 removed from it (you collected $2000 for the trade so your only down $3000

The ES cash you bto at 1286.25 will have bled a bit over $5000 and net net you will be long 2 ES contracts and poorer by $8000

THEREFORE I assume you won't leave this and go on vacation....
 
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