Strikeless Options possible?

thecoder

thecoder

Just thinking aloud a concept idea:

I wonder if one can design/create new option types w/o explicit strikes but where instead all and any value can freely be used as strike.
This of course would save much data storage and also data traffic,
but more importantly any desired strike would be possible.

Or maybe using any percentage values for the strikes...

Opinions?
 
Last edited:
thecoder said:
Just thinking aloud a concept idea:

I wonder if one can design/create new option types w/o explicit strikes but where instead all and any value can freely be used as strike.
This of course would save much data storage and also data traffic,
but more importantly any desired strike would be possible.

Or maybe using any percentage values for the strikes...

Opinions?
More...

It already exists. It's called futures or forwards.
 
I think Strikeless Options is possible under following conditions:
  1. Just have the historical volatility (HV) of the underlying.
  2. For all strikes use that single HV as IV. Ie. IV then is the same for all strikes.
  3. The option pricing is computed by using Black-Scholes-Merton formula, not determined using Bid/Ask anymore.
  4. By this, any arbitrary strike is possible
  5. The order consists of these data: Symbol, DTE, DesiredStrike, Call/Put, Long/Short, Qty (DesiredStrike can be any valid value). The local software (or webpage) of course shows in advance what that option costs according to BSM model, as the price is fixed for the current spot price of the underlying and its HV and the other parameters.
  6. Since no Bid/Ask is used anymore then orders with same parameters are enqueued and processed on a "first come, first served" basis.
This method has further advantages (besides the mentioned in the initial posting):
- volatility smile and volatility skew no longer happens as all strikes use the same IV, ie. the HV.

I think this can indeed work.

PS: "Strikeless Option" is maybe a misnomer b/c now all and any strike is possible... :-)
 
Last edited:
TAPO traded with a dealer upstairs. Trades of the average px against a fixed strike. You'll need ample capital to qualify for the relationship - they still have a reference strike - you'll need a dealer who wants to create them. Consider it impossible for retail accounts under OTC dealer requirements. Asian options may also be structured with some of the characteristics you're looking for - the same concerns as TAPO options.
 
P u b l i c C o m p l a i n t (b/c the report link doesn't work since he has me on block, and your software is buggy as we already discussed this case already ages ago in the Feedback board)

Hey Moderators! Why do you allow this POS destriero to write such racist and discriminatory postings?
And: by doing so he kills my and other peoples threads, ie. he is causing reputation damage to your site... Think about it...

Here the link to his posting:
https://www.elitetrader.com/et/threads/strikeless-options-possible.362393/#post-5478197
 
Last edited:
thecoder said:
Just thinking aloud a concept idea:

I wonder if one can design/create new option types w/o explicit strikes but where instead all and any value can freely be used as strike.
This of course would save much data storage and also data traffic,
but more importantly any desired strike would be possible.

Or maybe using any percentage values for the strikes...

Opinions?
More...

Uhh ohh, our "old friend" with the "fair puts" brilliant idea strikes again with an even brighter one.

If we're at it, why not have option-less options? So something that's sort of like an option but instead of having a maturity and a strike, how bout have none of them? Maybe calling them ... stocks?
 
@thecoder, in all seriousness I think your ideas confuse features of market with mistakes that need to be corrected. Let's take skew/smile as an example. Skew doesn't exist because of a market mistake or because the right trading products aren't out there. It exists because at each point in the curve buyers/sellers demand a certain price and at the "skewed" prices that is what the buyers and sellers demand for that point on the curve. If you created a product that magically eliminated skew, it would require buyers and sellers to transact at a price that didn't reflect the market when they were dealing in a product that could represent the skew area. When faced with that choice, no transactions happen. Ergo, the product ends up with zero volume and is pointless. All of your ideas seem to share the same underlying concept that there is a magic "correct" price for everything and everyone should trade at that price rather than a price determined by markets negotiating a price at every transaction. That concept is simply a non-starter.
 
You must log in or register to reply here.
Back
Top