Will buy 1 call and sell 1 put completely eliminate volatility?

E

e-miNY

If i want to do a directional play with option and i dont want the risk in volatility of option. Will buy 1 at the money call and sell 1 at the money put (Delta: (0.5-(-0.5)) = 1) give me the same result as i would long 1 future?
Would the movement in implied volatilty of the short put and long call offset each other?

Thanks in advance for all the options traders who have experience!
 
For what it's worth, I'll say that about 99.8% of the time, that'll be true. In a volatile price scenario, the bid-ask on the options should widen out faster than that of the futures. You'll have to be careful when offsetting the options against that type of backdrop. The futures would be easier.
 
Quote from nazzdack:

For what it's worth, I'll say that about 99.8% of the time, that'll be true. In a volatile price scenario, the bid-ask on the options should widen out faster than that of the futures. You'll have to be careful when offsetting the options against that type of backdrop. The futures would be easier.
More...

Right! The reason i have to do this is i am under capitalized for the market i want to trade. The korean options are pretty liquid and the bid-ask are usually at the minimum even in volatile market.
In reality, is really hard to buy a call and sell a put right at the money. It has to be skew to one side because the market doesnt trade right at the strike price. So, in that situation, i would be exposed to a little movement on implied vol. one way or the other right?
 
Quote from e-miNY:

Right! The reason i have to do this is i am under capitalized for the market i want to trade. The korean options are pretty liquid and the bid-ask are usually at the minimum even in volatile market.
In reality, is really hard to buy a call and sell a put right at the money. It has to be skew to one side because the market doesnt trade right at the strike price. So, in that situation, i would be exposed to a little movement on implied vol. one way or the other right?
More...

Nope, it's a synthetic long at any strike.
 
Selling one put is equivalent to selling covered call. So you are getting here 1 short covered call and 1 long uncovered call.
 
Quote from MTE:

Nope, it's a synthetic long at any strike.
More...

By that I meant that you're not exposed to IV.


Quote from gkishot:

Selling one put is equivalent to selling covered call. So you are getting here 1 short covered call and 1 long uncovered call.
More...

You can dissect it any way you like, it still nets a synthetic long.
 
You must log in or register to reply here.
Back
Top