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Anyone trading "Box Options" with Oanda???

  • Post #1
  • Quote
  • First Post: Edited at 10:27pm Jul 27, 2005 10:20pm | Edited at 10:27pm
Oanda just updated FXTrade. One long overdue addition is the ability to draw Fibos now. Still only very basic charting ability, though.

But they have added a new way to trade called "Box Options." Box options use the same basic principles as the regular options market many of you know and love, but it appears to be Oanda internal. You can also buy options as little as five minutes out ... that's right, five minutes.

The way it works is very simple. You scroll the chart into the future and draw a box right on the chart. You then input your price for buying that option .... essentially betting that the price will hit that box (or alternatively will miss it). Oanda gives you the potential payoff based on the option price, then you either cancel or pull the trigger. Max loss is the option price.

Interesting tool, in my opinion. What do you think??? Useful? Silly? How best to take advantage of it? What is the advantage/disadvantage of boxoptions over simply choosing a direction and putting on a trade?

All comments welcome!

James
VERY interesting!! red, where is the info on this? i cant find it on their site...

without seeing exactly what they are offering, i can make an educated guess that a box option is a combination of puts and calls that acts as a synthetic bet on volatility. ie if the price goes outside the box, you win. if this is indeed what they are offering, a box option is simply a wysiwyg way to do a volatility spread.

i am going to make another educated guess and say that they will not let you sell puts or calls, only buy them. and if this is the case, stay far far away. the seller of options is the one who makes the money, the buyer is the sucker.
if they let you sell them, though, i might have to open an oanda account!
Relax and be happy.
nevermind, i found it on their site...

http://fxtrade.oanda.com/boxoption/b...n_basics.shtml

as far as i can tell, they only let you buy the box spreads, you cant write (sell) them. i hope im wrong, because this is a big ole ripoff if im right.
Relax and be happy.
Quoting merlin
nevermind, i found it on their site...

http://fxtrade.oanda.com/boxoption/b...n_basics.shtml

as far as i can tell, they only let you buy the box spreads, you cant write (sell) them. i hope im wrong, because this is a big ole ripoff if im right.
OK Merlin, educate me.
Why is buying options a bad deal but selling them a good deal?

James
Me thinks that maybe we could use the box option price to trade with. I think there software is pretty good at winning the money so If the payout is high on our option we would trade the other way while not actually buying the option, just checking out the price it would be.
Quoting Redleg
OK Merlin, educate me.
Why is buying options a bad deal but selling them a good deal?

James
to understand this, youd have to understand "time-decay".

time-decay is what happens as your options get closer to expiration. every day that goes by, the option is worth a little less.

if you are the buyer of options, you are buying an asset that will experience time-decay. if you are the seller (writer) of the options, it works in reverse, and you will gain from the time-decay. when you write an option, you collect a premium up front from the buyer, and every day that goes by, you are one day closer to not having to pay out.

now, i realize that people make money on options both buying and selling. but the real dogs only sell because statistical studies have shown that assets with time-decay components are generally overpriced.
Relax and be happy.
oh yeah, here is another reason this is most likely a rip off...

if Oanda only lets you buy options from them, but not from other traders, and doesnt allow you to sell you options to other traders, then that is not really a market at all. its more like going to the craps table where you know the game is fixed against you. you cant bet against other players, only against the house.

to make this clear, lets say you buy an option for $100. the next day you want to get rid of it. the only person you can sell it back to is oanda, so the option is worth what they are willing to pay. they might only be willing to pay $20 for it. but what can you do? there are no other buyers.

like i said, i could be wrong and they will let you write options, but not from the info i see on their site.
Relax and be happy.
Merlin,

You are 200% correct. I'm going to get that information. If they do what you said its not worth it at all. RefcoFX has a similar program also.
Quoting Redleg
Oanda just updated .....
Interesting tool, in my opinion. What do you think??? Useful? Silly? How best to take advantage of it? What is the advantage/disadvantage of boxoptions over simply choosing a direction and putting on a trade?James
Based on your questions you don't understand even the basic work of options...(you are not alone,many FX traders don't)
My question to you is;Why you need to over complicate your life.
There are are two category of traders.
1**Successful FX traders,who are already making money simply trading FX;they don't need the extra headache.
2**starter traders,who first need to learn to trade FX in order to make money;so they don't need the extra headache.
Oh,yes,there is a third category;People who constantly looking for extra headache
Quoting hun83
Based on your questions you don't understand even the basic work of options...(you are not alone,many FX traders don't)
My question to you is;Why you need to over complicate your life.
There are are two category of traders.
1**Successful FX traders,who are already making money simply trading FX;they don't need the extra headache.
2**starter traders,who first need to learn to trade FX in order to make money;so they don't need the extra headache.
Oh,yes,there is a third category;People who constantly looking for extra headache
LOL!! Maybe I fit in your third category!

James
  • Post #11
  • Quote
  • Edited at 9:07am Jul 29, 2005 9:07am | Edited at 9:07am
Well, I tried it last night with a small box option, 18:20 to 22:00 with a $2 bid for a hit. You can sell the box back at anytime for a reduced rate given the pair hasn't moved too far from your box area.

As fate would have it there was a minor breakout in the opposite direction which pushed me away from the box until 21:50.

At 21:57 the candle jumped up and skimmed the bottom right corner closing the position for a well deserved $2.19 purse.

Okay, I admit I may have jumped up and down screaming like a girl - but hey, it was kinda fun.

So, regardless of whether options are a good idea or bad idea, whether it is a rip off by Oanda or added upon increased demand by users; I had fun.

I probably won't bet the farm on a box or utilize it as a serious trading tool, but I may play with them for some entertainment.

Capital Preservation is key to long term wealth accumulation
Quoting MuddBuddha
Well, I tried it last night with a small box option, 18:20 to 22:00 with a $2 bid for a hit. You can sell the box back at anytime for a reduced rate given the pair hasn't moved too far from your box area.

As fate would have it there was a minor breakout in the opposite direction which pushed me away from the box until 21:50.

At 21:57 the candle jumped up and skimmed the bottom right corner closing the position for a well deserved $2.19 purse.

Okay, I admit I may have jumped up and down screaming like a girl - but hey, it was kinda fun.

So, regardless of whether options are a good idea or bad idea, whether it is a rip off by Oanda or added upon increased demand by users; I had fun.

I probably won't bet the farm on a box or utilize it as a serious trading tool, but I may play with them for some entertainment.

LOL!! winning is fun, aint it?

you are hilarious man. i like the boyyaahh! are you a Cramer fan? i am

on a more serious note, when you "sell it back", is Oanda the only potential buyer?
Relax and be happy.
As far as I can tell, Oanda is the only buyer for the box options.

I personally think it would be insane to attempt to trade them for a standard profit. It's nice that Oanda responded to it's forum users and included requested options, as well as many other improvements to the platform.

At least it shows their listening somewhat.

PS: nobody got the "hedge" qoute; so I'm glad you caught the Cramer battle cry!
Capital Preservation is key to long term wealth accumulation
man the more i think about this box option thing the more it disappoints me. i know that forex is the wild west of trading, but shit, is this going to become a virtual vegas?

forex is a legitimate market, the best market in my opinion, and to see it reduced to a game of craps is a little disheartening, even for an optimist like myself.

i do see a ray of sunshine though. when more brokers start offering forex options, there will be arb opportunities created. and i will be one of the first to jump on this. boooooyyyyaaaaahhhh!!!

when the arb opportunities are there, it suddenly becomes a legitimate trading vehicle, because the FCMs will have to price their options right or else get killed by the arb guys.
Relax and be happy.
Quoting merlin
man the more i think about this box option thing the more it disappoints me. i know that forex is the wild west of trading, but shit, is this going to become a virtual vegas?

forex is a legitimate market, the best market in my opinion, and to see it reduced to a game of craps is a little disheartening, even for an optimist like myself.

i do see a ray of sunshine though. when more brokers start offering forex options, there will be arb opportunities created. and i will be one of the first to jump on this. boooooyyyyaaaaahhhh!!!

when the arb opportunities are there, it suddenly becomes a legitimate trading vehicle, because the FCMs will have to price their options right or else get killed by the arb guys.
Merlin,

I wonder if it there are opportunities to arb boxoptions with the real forex option market???

James
there could be. maybe there are some arb opportunities with spot market options vs. currency futures options. hmm....
Relax and be happy.
I quite like the idea of the box options and also the one's that refco use, surely they can be used for profit? If you think the market will move in a certain direction you are in profit and you know you can never be stopped out however far the market whips as long as it hits your price your in.
Pip Goes The Weasel
there is nothing wrong with a "box option" per say. a box option is nothing more than a option spread trade. if you understand option spreads, you can easily see that in order to draw a "box" of profitability, you would buy a call a lower strike and sell a call at a higher strike. the upper strike price creates the top side of the box, the lower strike price creates the bottom side, and the expiration time creates the right side of the box.

so really nothing wrong with this trade, as long as you buy it in the open market (ie you can sell the box option after you have bought it). that is not the case with oanda, however. there, after you buy the box option, the only person you can sell it to is oanda! obviously oanda fixes the odds in their favor, because they are the ones taking the other side of your trade! sure, you can make some money short term, but its no different than a blackjack table in vegas!
Relax and be happy.
Seems to me these options would likely be more profitable if used
as a hedge for news releases, such as a double touch option for
the NFP.
they could be used for hitting predicted highs and lows for that day or week ahead making sure that the return is say at least 52% of your option payment that way you have to make sure that you are correct 3 out of 4 to be in profit
Pip Goes The Weasel
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