I'm looking over $OSX Sep. in/near the money Calls. They are getting juicy. Any thoughts on the index and options ?
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$OSX calls
- Thread starter Boy Plunger
- Start date
Quote from riskarb:
Looking to sell OSX? How about selling the risk-reversal at -55d:
Long OSX Sep 170p at $2.55 28vol
Short OSX Sep 180c at $1.85 26vol
You're paying some into the -skew, but it's only $.10 -edge in vol expressed as $prem.
Where are you getting those strikes from?
I'm looking at 172's & 177's and 182's in Sep...
Furthermore, and i may be way off here, i'd want to sell all three calls at three different open interest and price levels for each.
Please elaborate on your setup, the mechanics, and practical theory of selling as you say the risk reversal at -55d.
As you can tell i am not fluent in this area.
Thanks risk.
short risk reversal at 55d
It's a 55delta short -- so a two lot would be delta equivalent to a synthetic short OSX position with 100 shares. 2 contract risk-reversal = 110 shares short at current cash-print. It has upside convexity risk, so you get shorter as the OSX rallies to a 200 share limited-exposure above 180. It's analogous to scaling your short into the rally.
You pay a premium on the put/call, but the risk is limited provided we don't hit 180 over the next two weeks. Net result: you own the 170p for $.70 if the OSX trades lower.
short synthetic OSX at 100d
You can short 100 deltas in OSX:
Long atm put
Short atm call
This is a synthetic short position -- fungible to selling 100 "shares" of the OSX cash index, less the edge lost in the bid/offer. OSX is trading 173.11 currently -- you could short the synthetic at 172.85 at current market. This trade is equivalent to selling 100 shares of OSX[if it were possible, naturally].
It's a 55delta short -- so a two lot would be delta equivalent to a synthetic short OSX position with 100 shares. 2 contract risk-reversal = 110 shares short at current cash-print. It has upside convexity risk, so you get shorter as the OSX rallies to a 200 share limited-exposure above 180. It's analogous to scaling your short into the rally.
You pay a premium on the put/call, but the risk is limited provided we don't hit 180 over the next two weeks. Net result: you own the 170p for $.70 if the OSX trades lower.
short synthetic OSX at 100d
You can short 100 deltas in OSX:
Long atm put
Short atm call
This is a synthetic short position -- fungible to selling 100 "shares" of the OSX cash index, less the edge lost in the bid/offer. OSX is trading 173.11 currently -- you could short the synthetic at 172.85 at current market. This trade is equivalent to selling 100 shares of OSX[if it were possible, naturally].
Or you could simply sell the calls as you mention. There is no need to sell the synthetic or the risk-reversal; just offering a (nearly) linear-payoff option position with the synthetic. Any index that has options can be shorted like any stock. This includes hard to borrow shares with listed options.
I very much appreciate your input.
Thank you for a concise explanation.
Thank you for a concise explanation.
I think my timing was dead on. Anyone agree/disagree?
The one thing i can do with options: look at an option/instrument and know when to sell high premium calls that will expire worthless. The downside is i have yet to be wrong...
If i had sold 177 calls and OSX traded up to, say, 185 the ramifications would be costly....
The one thing i can do with options: look at an option/instrument and know when to sell high premium calls that will expire worthless. The downside is i have yet to be wrong...
If i had sold 177 calls and OSX traded up to, say, 185 the ramifications would be costly....