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Let's Trade Options

  • #4,681
  • Sep 3, 2014 2:42pm Sep 3, 2014 2:42pm
Quoting njr
{quote} .....some of the 'experts' claim to be able to see black swans....
They are to busy now

Inserted Video
Hope is dangerous in this game.
  • #4,682
  • Sep 3, 2014 2:44pm Sep 3, 2014 2:44pm
Quoting StrayDog
{quote} They are to busy now http://youtu.be/vkWOse70Oyk
Too funny
  • #4,683
  • Sep 3, 2014 4:38pm Sep 3, 2014 4:38pm
Quoting njr
{quote}50-60% corrections but I can't see this significant % pullback coming anytime soon......some of the 'experts' claim to be able to see black swans....
I do think we will get a little slide if Draghi disappoints. I also think they will sink the euro more, either way. I bought some Jan EUO $20 calls for $0.18 yesterday. Otherwise, I have been trying to scrape up some dry powder for some possibility of volatility showing up this month. Between ECB and the FOMC in a couple weeks, we should see something move. I am hanging in UVXY bull put spreads, tried to buy back 9/20 $20 for $0.20 today, missed by a few cents....a riskier $22/$20 UVXY spread sitting at break even, I might've been wise to get out of it today...
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,684
  • Sep 3, 2014 5:19pm Sep 3, 2014 5:19pm
Quoting explor359
{quote} HEY bud, What options program are you using? Nice...
try this

https://www.dough.com/
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,685
  • Sep 3, 2014 8:26pm Sep 3, 2014 8:26pm
http://en.wikipedia.org/wiki/Brazili...election,_2014

http://www.cnbc.com/id/101969403?__s...&doc=101969403
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: 2014-09-03_ewz-hold.png Size: 27 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,686
  • Sep 3, 2014 8:42pm Sep 3, 2014 8:42pm
EWZ: Much has been baked in re: elections already, but you could make a case for more to run, with continuing cheap money flowing into em's. Strong USD might weigh on oil (VALE, PBR) but that's just 10% the holdings. Still looks a little like "buy rumor/sell fact" to me. But I might do a bull put spread on any good pullback, with a pre-election expiry....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,687
  • Sep 3, 2014 9:01pm Sep 3, 2014 9:01pm
Quoting The Fool
{quote} I do think we will get a little slide if Draghi disappoints. I also think they will sink the euro more, either way. I bought some Jan EUO $20 calls for $0.18 yesterday. Otherwise, I have been trying to scrape up some dry powder for some possibility of volatility showing up this month. Between ECB and the FOMC in a couple weeks, we should see something move. I am hanging in UVXY bull put spreads, tried to buy back 9/20 $20 for $0.20 today, missed by a few cents....a riskier $22/$20 UVXY spread sitting at break even, I might've been wise to...

an example of a bearish spy trade could be, LONG a call spread (yes long, but wait for it) and then hedge with the appropriate amount of stocks/spread, the ratio of which is always going to be between 50 and 1 (being long ATM call (long 50 stocks) and short 1 OTM call (lets say a 25 delta call which is equivalent to being short 25 shares), so to hedge for every bullish call spread you need to sell 25 stocks to fully hedge. if stock market indeed goes down, you callspread will naturally lose value, BUT gain SOME value (yes, gain) from the increased volatility of the options themselves, this phenomenon happens because people panic and start reaching out for more and more options for protection, lifting higher and higher offers thus artificially raising the explicit value of ALL options by a certain degree, which of course varies with types of options, date to expiration, how close to ATM is etc, etc

idea is that, should you be proven wrong, and stock market goes up, your loss on the stocks you are short as a hedge will be more than offset by the gains in the added value of calls that people will be reaching out for in droves, which will artificially raise the call value ABOVE the mathematical Black-Scholes model, which then market makers detect almost immediately and promptly sell the options to the flocking buyers, sometimes it really is not zero sum game
Thank you Malcolm, Belekas, Jim, raczekfx and Ryanmcd !
  • #4,688
  • Sep 3, 2014 11:01pm Sep 3, 2014 11:01pm
Quoting djambazov84
{quote} an example of a bearish spy trade could be, LONG a call spread (yes long, but wait for it) and then hedge with the appropriate amount of stocks/spread, ....... sometimes it really is not zero sum game
thanks, djambazov84 - I wish I had the account size that would allow me to trade options against underlying shares (.e., 100 shares SPY = $20,000 m/l) - that opens up another dimension in options trading. Someday, maybe....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,689
  • Sep 4, 2014 4:26am Sep 4, 2014 4:26am
Quoting The Fool
I do think we will get a little slide if Draghi disappoints.
Maybe more than a little. Been waiting for bond/equity divergence for some time. It just might begin todayzzz....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,690
  • Sep 4, 2014 6:48am Sep 4, 2014 6:48am
Hi,

I am backtesting few strategies on SPY and QQQ, just wanted some advice on options.
Is there a way to calculate even approximately what happened to the option from buy or sell points in backtesting?
My concern is time erosion of option value, is there a way to calculate time erosion using just the price of instrument?

Lets say close of SPY on May 14 2012, is $129.32, then on May 24 it drops to $126.81. Then on June 1st it goes to profit (assuming we are long) and close is $133.92.
From these prices is it possible to calculate which Call option would have been profitable?

Thanks guys, just need some wisdom on this. Hate using stops so I prefer options.
  • #4,691
  • Sep 4, 2014 7:52am Sep 4, 2014 7:52am
Quoting djambazov84
{quote} ... if stock market indeed goes down, you callspread will naturally lose value, BUT gain SOME value (yes, gain) from the increased volatility of the options themselves, this phenomenon happens because people panic and start reaching out for more and more options for protection, lifting higher and higher offers thus artificially raising the explicit value of ALL options by a certain degree....
I saw that phenomenon yesterday on AAPL... when it sunk hard, puts were gaining value rapidly, but calls was not losing value in same pace... because overall IV was raising, and influencing the increase in price of both puts and calls
Hope is dangerous in this game.
  • #4,692
  • Sep 4, 2014 8:08am Sep 4, 2014 8:08am
Quoting djambazov84
{quote} any options related question i`d be more than happy to answer, e.g. gamma scalping, option spreads trading, volatility arb, etc
Hi djambazov84, I would like to ask a question.
Hey njr, you are a option seller, would like to hear your opinion also, and of course TF and Cecil Gee you are most welcome...

Please be patient here.
It is about managing a short strangle. In tastytrade video I just watched yesterday, Tom Sosnoff was explaining what to do in some of situations with short strangle.

this is the video
http://www.tastytrade.com/tt/shows/w...e=social-share

So, you have a short strangle 45/55 on XZY stock, that is currently traded for $50. You collected $2.00 premium for it. (I think it is OK to assume that the premium for each side was pretty much even, lets say a $1.00 on both sides). So your breakevens are 43 and 57, since you took $2.00 premium. Scenario is that the stock is rallying hard. So it is now 52, it is ok, now it is 55 and testing your short call... you have enough time until expiry... AND you roll your put side to 50. Ok, I get that. But now, stock trading over 57, over your break even point, and is ALMOST 60. Then he rolls put side to 60, thus making "the inverted strangle". So, stock is almost $60 now.

SO MY QUESTION IS - YOU SOLD THAT 55 CALL TO SOMEONE, AND CALL BUYER PAID $1.00 FOR IT, SO HIS BREAKEVEN IS 56... now stock is almost 60 - WHAT IS STOPPING HIM TO EXERCISE HIS RIGHTS?
Hope is dangerous in this game.
  • #4,693
  • Sep 4, 2014 9:08am Sep 4, 2014 9:08am
Looking at YHOO again, I am interested in a put bullish spreads, like 35/37... because I think that YHOO will at least stay flat until Alibaba IPO.
Sep26 options has the highest IV, but bid/ask spread are wide, and OI low so far.
October monthlies are heavy traded, 35/37 could get filled at $0.67 credit-

I am just thinking about timing, maybe wait more for the approaching BABA IPO, in case IV ramp up a bit more, or not...
Hope is dangerous in this game.
  • #4,694
  • Sep 4, 2014 9:32am Sep 4, 2014 9:32am
so Draghi fills the punchbowl. Equities duly get higher. And bonds break further. Will the hot legs up in equities be enough to break the bond rally? I have my doubts, but I am watching TLT dip further today. EUR/USD knocking on the 1.3000, should drop through....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,695
  • Sep 4, 2014 6:32pm Sep 4, 2014 6:32pm
Quoting StrayDog
Looking at YHOO again, I am interested in a put bullish spreads, like 35/37... because I think that YHOO will at least stay flat until Alibaba IPO. Sep26 options has the highest IV, but bid/ask spread are wide, and OI low so far. October monthlies are heavy traded, 35/37 could get filled at $0.67 credit- I am just thinking about timing, maybe wait more for the approaching BABA IPO, in case IV ramp up a bit more, or not...
the IV is at 52 weeks highs can't see it exceeding anymore
  • #4,696
  • Sep 4, 2014 6:47pm Sep 4, 2014 6:47pm
Quoting The Fool
Will the hot legs up in equities be enough to break the bond rally? I have my doubts, but I am watching TLT dip further today. EUR/USD knocking on the 1.3000, should drop through....
But bonds and equities ended up both down. I was in the woods all day, missed the close. I can't see how UST's will not keep rising, though, and equities maybe, too. A low number on the NFP Friday could extend the slide for each. My Jan $20 EUO calls made good money today, EUR/USD to $1.25 by December would put those from $0.20 to $2.00......patience.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,697
  • Sep 4, 2014 9:24pm Sep 4, 2014 9:24pm
Draghi whacked gold, sub $1,250 opens the chute to $1,100. That's my fantasy. Oct $116/$115 debit spread goes $0.50/$0.37, $0.13 net debit....need to work a diagonal and leave an opening to the downside....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,698
  • Edited Sep 5, 2014 12:13am Sep 4, 2014 11:54pm | Edited Sep 5, 2014 12:13am
http://video.cnbc.com/gallery/?video=3000307890

Sure. TSL $15 9/20 calls are just $0.22. I might better do the Oct $12/$10 bull put spread for $0.20 credit. Maybe fund the 9/20 $15 calls that way...

Or forget about cheap options on cheap stocks....
Attached Image (click to enlarge)
Click to Enlarge Name: 2014-09-04_tsl.png Size: 124 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,699
  • Sep 5, 2014 6:02pm Sep 5, 2014 6:02pm
been missing lots of screen time but did some trades today: got out of some UVXY short puts, didn't get out of others: have 9/20 $22 short puts that could be a problem. Sold 9/20 $113.50 TLT puts against near worthless 9/20 $111 long puts. I am expecting TLT to bounce next week.

I'd bet US indices put on a nice bull run for next week. Supposedly, the weak NFP took the heat off the Fed re: forward guidance on a rate hike - and that rallied the markets - the old bad news is good news meme.

But "everybody" "knows" that August NFP numbers are usually revised upwards. There will likely be more good news than bad news in the coming week, and so that will be bad news, but probably not bad enough. I reckon. Also of course there are the usual geopoli flames waiting to flare up, but I guess they will always be there now....

Yep, I shoulda got out of that $22 UVXY short load....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,700
  • Edited Sep 6, 2014 10:16am Sep 5, 2014 10:51pm | Edited Sep 6, 2014 10:16am
Quoting StrayDog
Looking at YHOO again, I am interested in a put bullish spreads, like 35/37... because I think that YHOO will at least stay flat until Alibaba IPO. Sep26 options has the highest IV, but bid/ask spread are wide, and OI low so far. October monthlies are heavy traded, 35/37 could get filled at $0.67 credit- I am just thinking about timing, maybe wait more for the approaching BABA IPO, in case IV ramp up a bit more, or not...
I be lookin at this also, Stray.

Not sure the hype is not getting baked in real hard - so YHOO might not jet up so high on the ipo, or might & then fall back fast. Nobody knows when the ipo is? Since Jack Ma is superstitious, I bet it will be 9/23 - the new moon.

Anyway, YHOO should elevate or flat-line into the ipo. So, free money on the bull put spread, as long as you get out pretty quick. The 9/20 $38.50/$36.50 gets $1.08/$0.38 - $0.70 credit....YHOO was up a buck ah on Friday so all the numbers will change Monday....will look at 9/20 or even 9/12....
"If The Fool persists in his Folly he will become wise." - William Blake
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