trading the XDE.. the Euro...

[kapw7]

Quote from cdcaveman:

I've never thought about that..i wonder how all the options are priced between the different instriments in the same underlying.. could you assume that they are all the same? i'd have a hard time believin that.. supply and demand is different for every instrument even if it is the same underlying

You can compare with the OTC market which obviously is the highest volume. Free Bloomberg quotes can be obtained:
ATM 1M:
http://www.bloomberg.com/quote/eurUSDV1M:IND/chart
25D RR:
http://www.bloomberg.com/quote/eurUSD25r1M:IND/chart
and so on, although you need to do some work to convert from delta to strike, and extract IV values from RR and BF quotes

Another source with quotes and interesting tools from ISE:
http://www.fxoptions.com/site/ChartingTool.aspx

 

[TskTsk]

Quote from cdcaveman:

what you say makes competely sense to me.. delta hedging for me is tough because my account size is very small.. so i have to filter a scan for stocks that i can actually collect good premium on and that as well i can afford the deltas.. and in the same respect i don't wanna tie up to much of my capital in one trading series.. i've thought about selling a few extra calls on long stock with the powder on the side necessary to buy more stock if my gamma exposure goes up.. but not on near expiration options... but not super far back month either.. i'm still modeling that senerio for best risk to reward.. theres less jump risk with currency is probably why theres not as much money to be made in the delta hedge.. i guarantee there's a high amount of money exploiting the currency option area..

Do you use buy stops when delta hedging short calls? or do you even delta hedge like that? are you only buying options and delta hedging?

When delta hedging I use 0.5*gamma*S^2 which gives loss per rehedge. Solve for risk tolerance. Sometimes I use 1sd move (dont remember exact formula) as rehedge points. I buy both options and underlyer to rehedge (it varies).

The primary concern when determining wheter a premium is good or not is 30-day forward IV compared to historical vol. Optimally the two graphs should be far apart. IMO. sure there are other ways to determine it. it depends what you're looking to proft of.

 

[cdcaveman]

Quote from TskTsk:

When delta hedging I use 0.5*gamma*S^2 which gives loss per rehedge. Solve for risk tolerance. Sometimes I use 1sd move (dont remember exact formula) as rehedge points. I buy both options and underlyer to rehedge (it varies).

The primary concern when determining wheter a premium is good or not is 30-day forward IV compared to historical vol. Optimally the two graphs should be far apart. IMO. sure there are other ways to determine it. it depends what you're looking to proft of.

let me ask a few questions so i can get what your saying...
1.. "0.5*gamma*S^2" whats S^2 is the * a multiplication sign?
is this an equation.. .50 times the gamma times stock squared? i mean i know i sound retarted but haha idk
2..."you buy options to hedge" like itm? say itm calls to hedge otm calls sold?
3.. 30-day foward IV..... is that a garch forcasting thing? or where are you getting a forward implied vol number from?
4.. what other ways are there to determine optimal times to sell premium and hedge?

 

[FXbeachbum]

well in a way i was talking more simply about a married put strategy or the reverse instead of using stops at all.. but yea i would probably not exactly delta hedge but more something closer to a married put or if i was short the opposite.. seems to me you easily continuesly delta hedge with currency options because the market is open all the time.. and you can use buy and sell stops to gamma/delta hedge..

CDcaveman you still around? I’ve had this same exact idea long calls and puts using the PHLX dollar index options. Reason being as I can position size the option cost and not use a stop the option is essentially the stop. Of course Greeks come into play. Leverage seems to be large enough. Theta may be a killer if the trade takes too long to play out. Obviously these are better for longer term (daily) because of transaction costs So did you ever continue to trade this concept using the options? If so how did it work? I’m asking because I’m giving it a go trading 1 contract at a time right now to test the waters. I don’t like the low open interest but the spreads for options aren’t horrid either, and there seems to be a decent amount of offered and asked by the makers at any given time. Any thoughts or experience in these would be greatly appreciated. Thanks