Not neccessarily, look at what future interest rates are telling you and the potential hedge this person could get off against this position in this respect. Typically, interest rate risk or Rho, doesn't cause much concern when trading front months. Leaps are a different as they contain substantial cost of carry in them. The person who is trading this spread may be playing with this aspect. If you read the Cottle book, he talks about how they would trade huge volumes of put spreads for no apparent reason to the ill informed and then excercise the longs to get bring cash into the account which would earn interest. The hope was the short put in the position was not excercised thereby cancelling it out. Something similar may be going on here or some other interest play.
QQQ Leaps Put Spread
- Thread starter straddler
- Start date
Probably the wrong thread for this this....but I'll throw it out there.
I am interested in putting on a trade where I can basically make a bet that Starbucks passes McDonalds in market cap in the next 2-3 years or atleast the stock of sbux greatly outperfoms MCD.
Is there a good way to play this with leaps? Can I sell some MCD puts and buy some SBUC calls (leaps) and not be out of pocket much cash.
Anyone got ideas? Right now SBUX has half the market cap of MickeyDees...but MCD sells a hamburger for almost no margin and well....SBUX has crazy gorilla margins on hell everything in the store.
Anyone got an idea how to put on sometype of long term synthetic spread idea like that where I expect to mkt caps to converge...i.e I think sbux outperforms MCD but want to finance my sbux purchase by selling mcd....hell you know what I'm saying.
ideas?
I am interested in putting on a trade where I can basically make a bet that Starbucks passes McDonalds in market cap in the next 2-3 years or atleast the stock of sbux greatly outperfoms MCD.
Is there a good way to play this with leaps? Can I sell some MCD puts and buy some SBUC calls (leaps) and not be out of pocket much cash.
Anyone got ideas? Right now SBUX has half the market cap of MickeyDees...but MCD sells a hamburger for almost no margin and well....SBUX has crazy gorilla margins on hell everything in the store.
Anyone got an idea how to put on sometype of long term synthetic spread idea like that where I expect to mkt caps to converge...i.e I think sbux outperforms MCD but want to finance my sbux purchase by selling mcd....hell you know what I'm saying.
ideas?
Trajan, I agree that it is probably an interest play. Back in the early 1990's when I traded the XMI, we used to trade deep in the moneys and boxes for financing purposes. However, with interest rates at an all time low, I'm sure there are other ways to borrow money. The fact that it is supposed to be an overseas account led me to believe that he wanted to be long $ in his account vs another currrency.
From realmoney.com:
Go To Street Insight Market Talk
Aaron Task
Kass
2/10/03 02:49 PMÂ ET
JJC: that is a "gutsy" call by Kass and sounds like an all-or-nothing bet, given his simultaneous bullishness on shares.
Speaking of such bets, remember the discussion here in the CC and in my column last week about a big buyer of Jan 05 QQQ puts and calls? Well, he's apparently at it again today as there's been over 70,000 Jan 05 QQQ 45 put contracts traded (although no corresponding jump in the 55 calls.)
Depending on your perspective this is either:
-- A sign of outright bearishness as a rising P/C is a rising P/C no matter what the reason, or;
-- Really someone trying to put together a bullish 'put spread' trade.
-- None of the above. One trader, who expressed some knowledge of the trade, suggested "that qqq trade was a funding position, not a married put trade" and that the fund in question "was not making a bet on direction."
He noted on Thursday the "customer" sold the 45 puts which he had bought earlier in the week "because all of his short 55 puts were exercised against him." He was playing the "exercise lottery," trying to collect interest on the deep puts until they are exercised. "Once they're exercised, he is net long a ton of volatility on the 45s, so he sold them back," the source said. Any of the options mavens here have any additional insight on this?
open to other interpretations
Go To Street Insight Market Talk
Aaron Task
Kass
2/10/03 02:49 PMÂ ET
JJC: that is a "gutsy" call by Kass and sounds like an all-or-nothing bet, given his simultaneous bullishness on shares.
Speaking of such bets, remember the discussion here in the CC and in my column last week about a big buyer of Jan 05 QQQ puts and calls? Well, he's apparently at it again today as there's been over 70,000 Jan 05 QQQ 45 put contracts traded (although no corresponding jump in the 55 calls.)
Depending on your perspective this is either:
-- A sign of outright bearishness as a rising P/C is a rising P/C no matter what the reason, or;
-- Really someone trying to put together a bullish 'put spread' trade.
-- None of the above. One trader, who expressed some knowledge of the trade, suggested "that qqq trade was a funding position, not a married put trade" and that the fund in question "was not making a bet on direction."
He noted on Thursday the "customer" sold the 45 puts which he had bought earlier in the week "because all of his short 55 puts were exercised against him." He was playing the "exercise lottery," trying to collect interest on the deep puts until they are exercised. "Once they're exercised, he is net long a ton of volatility on the 45s, so he sold them back," the source said. Any of the options mavens here have any additional insight on this?
open to other interpretations
Quote from Avalanche:
Probably the wrong thread for this this....but I'll throw it out there.
I am interested in putting on a trade where I can basically make a bet that Starbucks passes McDonalds in market cap in the next 2-3 years or atleast the stock of sbux greatly outperfoms MCD.
Is there a good way to play this with leaps? Can I sell some MCD puts and buy some SBUC calls (leaps) and not be out of pocket much cash.
Anyone got ideas? Right now SBUX has half the market cap of MickeyDees...but MCD sells a hamburger for almost no margin and well....SBUX has crazy gorilla margins on hell everything in the store.
Anyone got an idea how to put on sometype of long term synthetic spread idea like that where I expect to mkt caps to converge...i.e I think sbux outperforms MCD but want to finance my sbux purchase by selling mcd....hell you know what I'm saying.
ideas?
Nobody with advice on how to put on the possible longer-term trade above? Seems like I could make some money there long-term somehow.
"08:01 ET MCD JP Morgan cautious on McDonald's (13.83)
JP Morgan continues to recommend that investors avoid MCD, saying the co has no fundamental visibility and a "currently improper" long-term strategy; better Jan sales in the U.S. were offset by weaker sales in Europe, and firm believes continued comp deterioration in the European mkt (about 30% of operating income) potentially points to overpenetration and declining consumer relevance of the MCD brand. "
