Option strategies

This is a discussion on Option strategies within the Futures & Options forums, part of the Markets category; Def your quote TO ME!! "bulldozer you are comparing apples to oranges. Osho sold a cheap option at the prevailing ...

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Old Jun 21, 2005, 3:17pm   #31
Joined Jan 2005
Def your quote TO ME!!
"bulldozer you are comparing apples to oranges. Osho sold a cheap option at the prevailing market prices. I dont' think you could do better."
================================================== ============

I will wager you $1000 for $500 I can do better. If you are right i will give you $1000
and if you are WRONG all you need to PAY is $500. Or would you like higher stakes?
I'm open to any price above the ones i mentioned at 2/1.
$2000 against your $1000 or higher perhaps?
ADMIN PLEASE DO NO REMOVE THIS POST AS MYSELF AND DEF WANT IT TO STAY ON THE BOARDS. Please please please. He works for a US based Brokers and i dont work for any brokers but i use UK Brokers.


Bull
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Old Jun 21, 2005, 3:35pm   #32
def
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this is silly. if oshu sold at 3 when the market is 3 offered, please let me know how you could have sold at a better price. personally i don't think selling naked puts is a good long term strategy but each is own.

I'll add though that i pointed out that the current maintenance margin on the dec put you sold at IB was 688 GBP earlier today. that is lower than the 715 you were required to pay yesterday.

finally, please do not put words in my mouth. I do not recall mentioning anything to you in regards to what the moderators should do with my posts. have a good day.
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Old Jun 21, 2005, 4:36pm   #33
 
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Dear def and bulldozey

Thanks for the input. I am learning

def- I tried yo check the margin on 1 put position of YM. Say initial was 27189 and maintenance was 26076. What do these figures represent? I donot have this sort of money in my account but when I do the trade not so much is deducted from available cash. Please clarify. Thanks
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Old Jun 21, 2005, 4:48pm   #34
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[QUOTE=def]this is silly. if oshu sold at 3 when the market is 3 offered, please let me know how you could have sold at a better price. personally i don't think selling naked puts is a good long term strategy but each is own.

I'll add though that i pointed out that the current maintenance margin on the dec put you sold at IB was 688 GBP earlier today. that is lower than the 715 you were required to pay yesterday.

finally, please do not put words in my mouth. I do not recall mentioning anything to you in regards to what the moderators should do with my posts. have a good day.[/QUOTE

================================================== =====================
Dear friends, traders, lurkers and Def,
I'm not talking about getting a better premium for the July puts! I'm talking about getting a better deal on MARGIN for the premiums recieved on any month and on any strike!
I think Osho knows what im talking about and others too.
Less marg = more trades and = more profits! I think most Option players would welcome LOWER MARGIN on positions. including fund managers.

CAN YOUR BROKER MATCH ZERO RATE ABOVE CLEARING HOUSE ON MARGIN?????
SOME UK BASED BROKERS CAN! I'M USING ONE AT THE MOMENT. Those that think I'm a joker? please dont reply. Those who are serius on option trading and want lower and better margins? are welcome to post. PLEASE DONT SPOIL THIS THREAD and NO ABUSIVE OR INSULTING BEHAVIOR OR ADMIN WILL DELETE POSTS. AS THEY ALREADY DID ON THE OTHER THREAD.

Bull
PS; Those that are NOT looking for LOWER margin and are HAPPY trading with their brokers SERVICE /charges PLEASE DO NOT POST. Thanx
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Old Jun 21, 2005, 5:07pm   #35
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Def, your quote:
"I'll add though that i pointed out that the current maintenance margin on the dec put you sold at IB was 688 GBP earlier today. that is lower than the 715 you were required to pay yesterday."
================================================== ====================
If you are correct in what you say than i guess i lost the bet and i need to pay you 1000 $
BUT if your wrong in what you say? How much would you pay me? You are saying that Mr Osho is charged LOWER rate on marg than me!

I'LL SAY IT AGAIN IF YOUR BROKERS BEAT ZERO% ABOVE LONDON CLEARING HOUSE ?I'LL HAND OVER $1000 TO OSHO OR ADMIN TO HAND OVER TO YOU.
AND I WILL GET ON PAPER FROM MY BROKERS CONFIRMATION THAT THEY OFFER THE RATE MENTIONED ABOVE. IF IT IS PROVED I'M CORRECT HOW MUCH WOULD YOU PAY ME? AND REMEMBER YOU HAVE THE EDGE ON ME! AS YOU SAID ABOVE 688 BEATS MY 715.
Bull
It is told, the truth will always come out sooner or later.

Last edited by bulldozer; Jun 21, 2005 at 5:44pm.
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Old Jun 21, 2005, 5:39pm   #36
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Osho,
I'm saying that your broker is charging YOU higher margin levels than my uk broker is charging me. If our friend Mr Def is correct and you are ON LOWER rates! he wins and you dont need to find a better broker. And i wiil pay promptly the $1000 bet.

Now onto the scalping the NAKED put. Scalping the long dated OTM far out month Put is by far better than scalping the near dated OTM put. Because the far OTM puts has heavier prems.

Bull
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Old Jun 21, 2005, 8:18pm   #37
 
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Dear Bulldozer

"Far OTM puts has heavier prems". This is correct to a certain extent and I donot understand why this is so. Is there more risk involved ?

YM premium for 10000 puts-- July 6, August 35 Sept 64 and Dec 156 . August is the best as sept is not 70 and Dec is not 192 (in straight proportion) . Thanks for your insight.
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Old Jun 21, 2005, 10:14pm   #38
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Quote:
Originally Posted by osho67
Dear Bulldozer

"Far OTM puts has heavier prems". This is correct to a certain extent and I donot understand why this is so. Is there more risk involved ?

YM premium for 10000 puts-- July 6, August 35 Sept 64 and Dec 156 . August is the best as sept is not 70 and Dec is not 192 (in straight proportion) . Thanks for your insight.
================================================== ====================

Osho,
Did you get a reply to your question from def? He told us he works for IB.

I have many questions for your broker perhaps you can put it to them as i had little joy getting Def to answer them. These questions will probably help you and others become better traders.
I will dig them out from the other thread and post here in a mo.

I trade mainly the footsie index. Did you get that link i sent you on prices.?

Osho your quote below:
"Far OTM puts has heavier prems". This is correct to a certain extent and I donot understand why this is so. Is there more risk involved "?

This carries no more risk then the one you did with the same strike for july for just £30 income.
They both have NO intinsic value! just time value only. Obviously my strike pays more, because its far dated. They are both on Delta .o [zero]
You can ask them these questions too and pls let me know their reply and the delta issue on both.


Bull

Last edited by bulldozer; Jun 21, 2005 at 11:34pm.
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Old Jun 21, 2005, 10:26pm   #39
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Quote:
Originally Posted by bulldozer
kiwi,

My broker is uk based and here are just a few things about their service:
1. Marg charged by them is ZERO on all strategies. Only pay marg to the clearing hse at their rate and no addition made by brokers.
2. All trades are recorded over the phone, so if an error is made and there are losses of x amount of £'s it can be traced thro the tapes.
3. All trades are repeated over the phone to make double sure that details are correct.
4. If a option strategy is on marg call there is 3 days grace to pay up. The bonus of this is that mrkts can change in my favour and the marg-call is cancelled.
5. I am allowed to adjust positions if im on marg-call without first settling the marg issue.
6. They would never close the written legs if marg is not paid after the grace perriod is up. They would close the short and the longs at best price to suit the client [clients best interest]
7. They allow me to use hedge's against my options position that are NOT options related at all and this will reduce the marg by a great deal and increase my contracts volume, which in turn increase's my income [profits]
8. They specialise ONLY with derivatives trading and are not over streched with work. I like this because i can have a good chin-wag with them about the mrkts and other things too.

9. They are regelated by the FSA a stronger bodie than the US

Can your broker provide this type of service?

Bull

================================================== ====================
Reply by def :

Yes, I do work for IB and I don't want to get into a tit for tat here but I will address your comments:

1. If a strategy requires margin, then we will charge margin as required by the exchanges. If what you imply is that you do not have to put up any capital, I find that hard to believe. Not only does this fly in the face of regulations, would you really be comfortable placing capital at a firm that doesn't require margin for their clients before entering a trade?

2. All trades entered in via IB's TWS have an extensive audit trail that is recorded and saved. Clients can also save a local copy of their audit trail as well. Clients who call in to place a trade naturally do so over a recorded line.

3. By the time your broker confirms the order to you over the phone you may have missed an opportunity. Nevertheless, parameters can be set on the TWS to pop up a warning box or to confirm entry of an order.

4. margin/credit at IB is real time. If a position goes in your favor, you can use that capital to put on other positions.

5. You should be able to close a position given the capital within the account satisfies regulatory requirements

6. You can set which positions/legs are liquidated first via the TWS.

7. Not sure what you are stating but available net liq determines buying power. If you are talking buy/writes and the such, you can do those as well.

8. IB has extensive experience with derivatives.. Look up the history on our web site.

9. We are also regulated by the FSA but to say they are safer is ludicrous. US broker dealers will fall under SIPC which offers insurance of upto 500K (100K cash, 400K securities). In addition, IB has insurance from Lyolds of London with protection up to 30 million. More importantly, IB has ample capital with the Group being ranked the 16th largest securities firm in the US. The IBG has roughly $2 billion in equity with little or no debt.

Other items you address:
- you say interest doesn't matter. It certainly does. interest earned/paid is a factor in pricing options).

- sell ATM options. If you have sufficient equity in the account you can do so. If you don't you will not be able to.

- naked options: when opening an account a number of factors are taken into account when granting option trading permissions. Rogue trading is not an issue at IB since we require margin up front. I.e. if your net liq is not high enough to support initial margin requirements, you will not be able to enter a trade.

- how many leave and why? I don't know. I do know that we receive more than 5 account transfers into IB for every one that leaves.

- trade by car: we're not interested in that type of business. we are interested in servicing the active trader. If needed, clients can trade via a PDA or call into our trade desk.

Our options business is doing very well and is experiencing large growth. We believe our SMART options routing is second to none. With that said, IB is not for all traders and we can't be all things to all people. That's what's great about competition.

This post was taken from :
http://www.trade2win.com/boards/show...t=15743&page=1

Last edited by bulldozer; Jun 21, 2005 at 10:34pm.
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Old Jun 22, 2005, 9:00am   #40
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Morning everyone....

Could we get back to the original basis of the thread and talk about the actual strategies being used?

A couple of people have talked about the naked writng of Puts which are well OTM. For example the selling of the 4625 Puts for a premium of 3.0 points (minus comissions). Is there not more 'value' to be had in selling Puts with a slightly higher strike (for say 8.0 - 9.0 points) which could be traded out of once they fell to say 3.0 - 3.5 (or indead left to expiry if the market rallies or maintains a higher range). The idea is based around the much faster decay of premium which occurs in the last month. The risk might be better also as I've seen some of the Puts selling at 9.0 or so decay to 4.0 in just a few days. Obviously this is a strategy to play in stronger markets and the reverse could be played in the weaker markets using Calls.

Views?

Steve.
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Old Jun 22, 2005, 9:16am   #41
 
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Spreads are so wide. e.g this morning 4675 aug bid is 5 and ask is 10
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Old Jun 22, 2005, 10:21am   #42
 
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Anybody selling options on other indices/futures except ftse. FTSE options volume is very low. I noticed volume on ESTX50 is good. Any other products? Thanks
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Old Jun 22, 2005, 11:39am   #43
 
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Quote:
Originally Posted by stevespray
Morning everyone....

Could we get back to the original basis of the thread and talk about the actual strategies being used?

A couple of people have talked about the naked writng of Puts which are well OTM. For example the selling of the 4625 Puts for a premium of 3.0 points (minus comissions). Is there not more 'value' to be had in selling Puts with a slightly higher strike (for say 8.0 - 9.0 points) which could be traded out of once they fell to say 3.0 - 3.5 (or indead left to expiry if the market rallies or maintains a higher range). The idea is based around the much faster decay of premium which occurs in the last month. The risk might be better also as I've seen some of the Puts selling at 9.0 or so decay to 4.0 in just a few days. Obviously this is a strategy to play in stronger markets and the reverse could be played in the weaker markets using Calls.

Views?

Steve.
Writing OTM puts (or calls) which either expire worthless of can be rolled back (ie buy to close the written puts, finace with the sale to open of a longer dated put) is a valid stratagy as long as you keep an eye on the assignment risk. It "should" realise in small but steady cash flow.

The only time I've sen it fail was when the exchange/broker margin rules were increased which tends to happen after sharp market moves

Read the small print of your contract, pound to a pinch of pigs**t this can be done with NO notice!.

This could quite easily blow you out of the water.

At the end of the day your taking in small amounts of money in return for taking on large amounts of risk. Lloyds of London operates on a similar principal.
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Old Jun 22, 2005, 5:18pm   #44
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Stev, Osho. and FRIENDS and lurkers too!
Some good questions there guys.
I will answer all ur questions plus more. Most of the answers will be sent to ur PM, so take a look now and then at the PM service. I prefer to do it this way as there is some traders who dont need help and for other obvious reasons too.
Firstly i want to tell you that my Dec's 4625 short puts were closed at 31.5 [scalped 6.5 pts] writen last monday for 38 pts. Order was placed at 9 am this morning, was called by broker on mobile phone at 2.25 pm and told positions filled.

Now, i will tell you some things that you may or may not agree with but these facts WILL become clearer as time goes by and you've done more trades and diffrt type of trades.
Firstly, youv'e got to understand that there are strategies that some brokers will NOT allow you to do, the brokers have GOOD reasons for this. Some brokers trading policies are geared toward begginers and novices in order to protect thier clients account and also to protect the firm [brokers].
The more "advanced" option trader wants MORE freedom to trade diffrt types of strats, so you need to find the broker that will ALLOW you the freedom to trade this way. Heres some important questions to ask them, [You need first get the RIGHT broker before you make your FIRST TRADE this is vitally important if you want to have the "EDGE" over other traders.]
1. Can i trade naked PUTS/Calls.
2. How much MARG will be used on OTM, ATM, ITM naked positions. and how SOON can you tell me how much FREE cash is left on my account.
2a. Whats the margin rate charged at.
3. If my FREE cash is near the bone [zero] will you tell me without ME ringing you first.
4. What happens to my positions if there is NO FREE cash in my account. Will i be closed out ON ALL or will some positions be closed out or will they buy back some written legs in order to bring IN FREE CASH into account or can my positions be tanpered with without being told and without my permision.
5. Can i adjust positions if I'm on MARGIN-CALL without first settling the marg issue.
6. What rate is the MARG on and does it reduce when ive become a good and better trader.
7. How much GRACE TIME do you offer me when account is on MARGIN-CALL and is this negotiable.
8. Can i ring a dealer for a chat on the mrkts without placing an order.

DO YOU UNDERSTAND No 4?

All of the above questions are very important to the advanced option trader. IF you dont have all those conditions in your favour? You are at a GREAT DISSADVANTAGE!!
You will notice that i did not put the question about the >> brokers fees, this is normally the first question asked by the novice traders! people join the brokers because the fees are the cheepiest! THIS IS NOT a good reason to join any broker!

Now to your questions and tips.
1. Yes, you can get bigger prems and scalp them any time you wish.
2. The far dated and near dated OTM options has no intrinsic ONLY time value.
3. Always try to write OTM with Delta of ZERO and use the THETA to ur advantage.
4. Dont write naked Calls until you have a healthy profit in ur account.
5. A near dated naked put some times carries a heavier marg than a far dated one at the same strike.

I hope the tips of this post will make you better traders;
I dont need any fees for this advice or future advice.
But if you feel you need to give some thing in the form of gratitude: Please donate to any of my favorite charities in ur area:> Help the aged, Children in need, Cancer research.

Bull
Its more of a blessing to give than to recieve.
Pls check out >> www.jc53.com <enjoy

Last edited by bulldozer; Jun 24, 2005 at 9:52pm.
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Thanks! The following members like this post: osho67
Old Jun 24, 2005, 6:41am   #45
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Looks like a big mark down on FTSE this morning. Anyone tempted to use the increase in volatility / weakness to write some OTM Puts?

Steve.
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