What aren't all options cash settled?
- Thread starter wxytrader
- Start date
You beat me to it...GameStop!!
You obviously didn't read my post or didn't understand it. I wrote very clearly
That's how you manage the risk that you are talking about which is called pin risk. You need to read more on "pin risk" and you would understand what it is. Another way is you close the option position before you get exposed to this pin risk. This pin risk affects any assets that are affected by ATH including pre-market price spikes, not just assets with physical delivery. You like cash-settled options so much? There are cash-settled options that take next-day prices as the settlement price and they would be affected by this pin risk that you are so afraid of just the same.
Yes it is. Trading options is not the same as trading other assets like stocks and ETF's or Forex and etc. Options have their own intricacies and complexity due to their expirations and settlement that do present their own unique challenges and you as a trader are expected to manage that; that's part of trading options. You can't expect everything to be changed for you just because you can't manage something. Using your dog's example, dogs DO BITE; that's their nature. It's up to the owner to make sure that the dog does not bite people or things that it shouldn't be biting. You cannot expect to knock off the teeth and destroy its jaw muscles so it won't bite or change its DNA so it won't bite? Then it's not a dog anymore.
Whether you have to do panic selling or not to manage pin risk is your thing. People have managed pin risk perfectly fine since the beginning of options trading and have managed to make enormous profit from options trading. Pin risk is not something that people think about much. You are trying to change options for the tiniest thing that people are not bothered much about. Options are what they are, with cash-settlement and with physical delivery. Word of advice: Don't try to change things to suit you just because you can't manage it.[/QUOTE]
100% dead wrong.
If they were insurance they would be called insurance. They're called options specifically because the give you the option to buy or sell something. It's right there in the name
Think about real estate:
if you buy an option on a piece of property you want the ability to actually buy it, not just bet on the appraised value. You might have a plan that could massively increase the value of that property and the last thing you want is to be paid cash based on a stale price that doesn't actually guarantee the ability to buy the property at that price.
Demanding real settlement is what prevents ridiculous manipulation of price.
Actual settlement is a huge deal in terms of the behavior of markets.
Look back to the housing crash. You'll see there was a time period where firms were quoting bogus prices on MBS. The firms could get away with that because people like Michael Burry did not have puts. If he he had puts he could have forced them to buy worthless MBS from him at their nonsense quoted prices.
Having actual settlement is a major factor in stopping crap like that from happening.
Not being able to force reality to enter into those prices allowed the crisis to get bigger and last longer
You wrote this in April of this years...One of your first posts.
I think someone lied on their option application...I like the "or whatever"!!
I have level 3 or whatever because I have a margin account and can short stock and write contracts. My broker doesn't allow naked shorts for the obvious reasons described above. I am only going by what the broker agent told me on the phone. They were looking at my account and were going to put the spread through (I don't use thinkorswim and have to actually call in spreads...not sure what happens if I make two seperate trades)...anyway they saw my margin and clearly could see that I could cover the maximum spread risk, but not the short call.
btw my broker is a major institution. Either way they get their fees and take on no additional risk for facilitating the trade assignment...that is kind of their job as brokers.
I think someone lied on their option application...I like the "or whatever"!!
I have level 3 or whatever because I have a margin account and can short stock and write contracts. My broker doesn't allow naked shorts for the obvious reasons described above. I am only going by what the broker agent told me on the phone. They were looking at my account and were going to put the spread through (I don't use thinkorswim and have to actually call in spreads...not sure what happens if I make two seperate trades)...anyway they saw my margin and clearly could see that I could cover the maximum spread risk, but not the short call.
btw my broker is a major institution. Either way they get their fees and take on no additional risk for facilitating the trade assignment...that is kind of their job as brokers.
Yeah that was frustrating having a platform with no built in strategies...couldn't buy the long call before the short put either as the platform wouldn't group them so it would flag it as a naked call when you tried to put the short call through...this why you'd have to call in.
The whatever comment was because I don't fing know what level is what as they could be different with every broker ..just wanted to write options for spreads and got a full margin account right from the get go. It's not rocket science. What are they going to talk about risk management? I have lost and made more than most traders ever will. On my BITO call an agent on the phone actually suggested I try out a paper account because my call option was down 27K. I held through and rolled out until it was down to 5k equity but held strong because I knew bitcoin was going to rally by January and I got out in the end unscathed...could have held for a x2 or x3 profit... BTW, have you ever had a brokerage quiz you? They ask questions like what's a call...what's a put lol...so not exactly some elitist club or desteiro level.
Anyway the moral of the story is money in stocks is made with your balls not with your brains.
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Probably...the old adage is sometimes you can be too smart to make money in stocks...like my mortgage broker always trying to get me into dividends. If you divide my capital gain I'm making like 40%...just cash poor. Anyway I was able to hold because I had statistics on my side...wasn't just a hail Mary...like Michael bury in the big short saying he was just early...and the money guy was like thats the same as being wrong. Anyway bury held strong because he had the data and knew it was going to drop...I'm like Michael bury I guess.
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Yes check his blog. gross was selling naked calls at very safe distance above around 450-500 ish. another less known chinese trader was also selling naked calls above 500.
As I recalled it was impossible to borrow the shares hence the squeeze.