The best options strategies

[botpro]

• What is a mis-priced option?
• What is a fair-priced option?

Can those terms be defined in anyway?

IMO, a mispriced option is when the premium for a particular strike is wide off of what it should be when compared with the other strikes of the same option.
For example if the IV of a strike in the middle is bigger than that of its predecessor and successor, or is "out of order"; in that case also its price will be "out of order", ie mispriced.
One can find many such examples, I'll try to find one... Here's one:

MO (Altria Group Inc.) CurSpot=62.07 Puts-2016-Jul-15:
Strike     ContractName    Last     Bid     Ask     Change     %Change     Volume     OpenInterest     ImpliedVolatility
...
62.50     MO160715P00062500    2.79    2.55    2.86    -0.02    -0.71%    3     76    18.38%
65.00     MO160715P00065000    4.35    3.60    4.95    0.00    0.00%    20     20    22.40%
67.50     MO160715P00067500    0.00    5.75    6.60    0.00    0.00%    0     0    21.28%
70.00     MO160715P00070000    14.75    6.70    10.70    0.00    0.00%    0     21    38.93%
...

Here, either the 65 strike or the 67.50 strike, or even both, is mispriced because its IV is "out of order".

And a fair priced one is when it is, obviously, not mispriced . Also if IV=HV then it should be fair priced as well.

But, I am sure some of the experts here can maybe give you a better answer...

And: You call yourself "OptionGuru" and don't know what a mispriced option is?...

 

[Martinghoul]

Hmm. are you serious with these questions? Because HV can easily be calculated from the historical prices of the underlying.
And from the market premium one can calc the IV, together with delta and many others...
So, I don't get your point here.

What? You must be joking! Vola calc and calc of all the greeks is the simplest to do.
Really, I think you must mean someone else but me, even though your above reply was made quoting my posting.

Yes, these questions are serious and no joke to be seen for miles around... One day, when you decide to talk less and listen more, you might understand. This stuff isn't simple: people spend years and years trading options and yet they often learn something new. I am speaking from personal experience here, albeit it's not in equities.

If this imples that hedging is useful only when the entry is done with a mispriced price, then I must say it's complete utter BS.
Entry price, be it fair or mispriced, is irrelevant for hedging, as the delta is the main player, with optionally some of the other option greeks...

Really? And how, pray tell, are you going to compute the delta and those other option greeks?

I won't talk about your other post. You just need to pause for a second and listen carefully to what other people are trying to tell you, esp longthewings.

 

[samuel11]

Hmm. are you serious with these questions? Because HV can easily be calculated from the historical prices of the underlying.

You have 30 min to tell me what is the realized volatility of SPX between today’s close and Friday, March 25th 2016 at the close.

Apparently, you can “easily calculate it”, so please show us.

 

[botpro]

You have 30 min to tell me what is the realized volatility of SPX between today’s close and Friday, March 25th 2016 at the close.

Apparently, you can “easily calculate it”, so please show us.

NOBODY can calculate the future volatility, nobody! Or will you maybe claim that you can???
I'm just talking of historical volatility (HV) and current and past IVs and greeks, not that of any future.

 

[botpro]

Hey Martinghoul, is this samuel11 maybe an alias of you?
Because he gives every posting, be it even trash, always a Like, even when he does not grasp a tiny bit of the discussed stuff.

 

[botpro]

This stuff isn't simple: people spend years and years trading options and yet they often learn something new. I am speaking from personal experience here, albeit it's not in equities.

What is your expertise in options? What options model and instruments do you use?

botpro said: 
If this imples that hedging is useful only when the entry is done with a mispriced price, then I must say it's complete utter BS.
Entry price, be it fair or mispriced, is irrelevant for hedging, as the delta is the main player, with optionally some of the other option greeks...

Really? And how, pray tell, are you going to compute the delta and those other option greeks?

You can't calculate any future value.
I'm talking of current and historical values.
Entry price means, obviously, the price at entry, and not the price after the entry.
So then, what exactly don't you understand in my statement in the quote above?

You just need to pause for a second and listen carefully to what other people are trying to tell you, esp longthewings.

I asked him some serious questions, am curious what he will answer...

 

[Martinghoul]

What is your expertise in options? What options model do you use?

Well, I dunno, let's see... I've been a buyside risk taker for more than a decade. Interest rate and, to a lesser degree, FX options are among the products I routinely rely on. Please note that I don't consider myself an expert by any stretch of the imagination. I have colleagues who are infinitely more knowledgeable.

If you have to know, I mostly use multiple different variants of what's known as a SABR model. For reasonably vanilla products, that is.

 

[botpro]

Some people seem not to understand this simple logic:
When tomorrow comes then it will be the present.
And then you can calculate its values because it is then the present...
OMFG!

 

[OptionGuru]

Hey Martinghoul, is this samuel11 maybe an alias of you?
Because he gives every posting, be it even trash, always a Like, even when he does not grasp a tiny bit of the discussed stuff.

Samuel11 is an ET sockpuppet. Below is my definition of a sockpuppet from your Detecting Sockpuppets thread.

Link to: Detecting Sockpuppets

When it comes to ET a sockpuppet is someone who religiously will always defend or support another ET members posts by liking the posts or quoting the posts with a favorable reply. But mostly liking because the sockpuppet will have nothing to contribute to the thread. As an example Destriero has lots of sockpuppets.

 

[Martinghoul]

You can't calculate any future value.
I'm talking of current and historical values.
Entry price means, obviously, the price at entry, and not the price after the entry.
So then, what exactly don't you understand in my statement in the quote above?

I would like you to explain to me the precise method which you indend to use to compute the instantaneous ("current" in your terminology) delta (let's leave the other greeks out of it) of an option and which inputs you are going to need to perform this calculation. Please feel free to provide as much detail as you like.

As to you asking questions, is the bit where you describe what you're told as "complete utter BS" part of one of them? If so, you sure have a most curious way of questioning people, I must say...