Q
QuestOptions
Maybe this list can be helpful if you interested in futures options : http://www.cmegroup.com/tools-information/find-a-broker/broker-directory-na.html
Cheers. What I was struggling with is that people like Saxo Bank offer FX Options but they are European not American so I have to time the exercise perfectly!
To answer my own question, I found a couple of US retail brokers claiming to provide these: Digital Vega, FX Bridge. Apparently FXCM was going to bring on a retail options platform this year but pulled it.
Does anyone have experience with the Digital/Bridge?
The FX world is driving me mad as I'm an ex-equities trader just finding my feet!
To answer my own question, I found a couple of US retail brokers claiming to provide these: Digital Vega, FX Bridge. Apparently FXCM was going to bring on a retail options platform this year but pulled it.
Does anyone have experience with the Digital/Bridge?
The FX world is driving me mad as I'm an ex-equities trader just finding my feet!
fxeconomist
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SaxoBank brought american touchies (not american vanillas) - but you have to select the expiries (once at a few days) and also select the strikes (from a list). Also, NO TRIGGERS, same as BetOnMarkets from this point of view...
I looked like a month ago on the FX Bridge platform (ProTraderPlus - the Alpari implementation), but I didn't see any touch options. I wait too for them, because both BetOnMarkets and Saxo are inadequate... FXCM planned DealX for institutionals... No news on DigitalVega Medusa nor that SurfaceExchange... FenicsExotics is out of reach, same vCapFx, Barclays' Barx, Credit Suisse' Merlin etc... I still hope FXBridge will bring well done touchies , but I don't see any traces on Google that they would be even working at this...
Martinghoul
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Do you know what it actually means for an option to be "American"? Do you know that, in most cases, if you exercise early, you're, basically, giving away money? That's why most options, even the officially American ones, are, in practice, European.
fxeconomist
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When I was in school, american options were vanillas allowing exercise any time before expiry. Things changed , in the meanwhile touch options have become "american".
Martinghoul
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A "touch" option is smth completely different... American and European options are still defined exactly as they have been before.
maxima
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I think the guy was thinking of vanilla vs exotic rather than european vs american.
of course american is american because this is the basic property. but recently conversations around that more complex products like touch or binary are now considered by many as vanilla but before they were exotics...
I think dude misunderstood one of these conversations....
of course american is american because this is the basic property. but recently conversations around that more complex products like touch or binary are now considered by many as vanilla but before they were exotics...
I think dude misunderstood one of these conversations....
fxeconomist
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Hmm, I guess I misunderstood. I supposed that options traded in US are automatically american, therefore not being able to find "american options" seemed to me not being able to find touch options. This misunderstanding is due to the fact that binary options about expiry (higher/lower than) are "european exotics" while binary options that are about touch are "american exotics".
Where did you find out that touches are becoming a sort of "vanillas" ? I mean there are a lot of junky *option*.com brokerages, and even more respectable ones offering "european exotics" , less or more standardized, but the offer for touches is extremely thin. Aside BetOnMarkets and SaxoBank, which are equivalent one to another, adding and subtracting differences between the platforms and options, I couldn't find any other brokerage to implement touch options in a both usable (with triggers) and fair play manner (fair pricing). Not that BetOnMarkets and SaxoBank would implement them in a usable and fair manner, but there are no other brokerages to offer them (expect IG markets perhaps).
Where did you find out that touches are becoming a sort of "vanillas" ? I mean there are a lot of junky *option*.com brokerages, and even more respectable ones offering "european exotics" , less or more standardized, but the offer for touches is extremely thin. Aside BetOnMarkets and SaxoBank, which are equivalent one to another, adding and subtracting differences between the platforms and options, I couldn't find any other brokerage to implement touch options in a both usable (with triggers) and fair play manner (fair pricing). Not that BetOnMarkets and SaxoBank would implement them in a usable and fair manner, but there are no other brokerages to offer them (expect IG markets perhaps).
maxima
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vanilla vs exotics is a figure of speech. american vs european is very important property of the product.
exotics become less exotic with introduction with computers and complex credit products etc.. this could be a reference point in conversation between to BAs to a proper trading desk. but thats it. it is not a classification. perhaps iron condor was exotic trade 50 yrs ago.
ps for retail brokerage it is going to be exotic for a little while yes...
exotics become less exotic with introduction with computers and complex credit products etc.. this could be a reference point in conversation between to BAs to a proper trading desk. but thats it. it is not a classification. perhaps iron condor was exotic trade 50 yrs ago.
ps for retail brokerage it is going to be exotic for a little while yes...
maxima
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I just looked up binary options and it appeared that a huge number of some bucket shops offering them.
It must be popular product to sustain all those leeches..
so tell me - is there some kind of hedging strategy to complement forex trading or it is naked betting on the market moves?
It must be popular product to sustain all those leeches..
so tell me - is there some kind of hedging strategy to complement forex trading or it is naked betting on the market moves?
fxeconomist
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Hehe... Don't be confused with what you see... Most of these bucketshops have them standardized in a way so that the payout is always the same, like 75% for instance. Most of the binaries offered by the bucket shops are european - they refer where the underlying expires.
The trouble with the european binaries is that they are too dumb. The expiry point is unique - that means there is only one result of a binary strategy involving european binaries. Using american binaries, however, there are many outcomes of an option strategy, depending on which barriers are touched and which not. Reconstructing the same behaviour with european binaries is not quite possible, because at the barrier, for instance, american one touch option has 100% output and finishes ITM at that time, while the corresponding european binary has just a maximum delta, there fore selling an european binary at the barrier point to mimic an american binary is completely pointless.
But the problem comes from the imposed standards and limits that come from the brokers.
The largest degree of liberty is offered by BetOnMarkets. You can only buy options, not sell them, but they compensate offering a pretty good, though not as it should, range of options: One Touch/No Touch , Stay Between/Goes Outside. The missing class is Double Touch/Double Contra - which was removed about 2 years ago and which was crucial to have better hedging strategies.
So, on BetOnMarkets you can pick a wide range of expiries - starting from 5 minutes ; also, you can pick whatever barrier you want. On SaxoBank you can both buy/sell options, but the expiries are almost weekly and barriers are distanced by 100 pips. SaxoBank only offers One Touch/No Touch. No platform offers triggers.
Hedging with BetOnMarkets is pretty simple, though the lacking triggers and the lacking Doubles class is making it too hard to even attempt. For instance, you can hedge two near One Touch options with a Stays Between. You will have a cost of about 130% and an output of 100% if no barrier is touched or only one is touched. If both barriers are touched, the output is 200%. This is just one example. My favorite option was the Double Contra - which pays out in full if the 2 barriers that compose it are not both touched - allowing for a lot of One Touch/No Touch games around the possible price paths.
Finally, a correct hedge strategy to capitalize on theta gain could be on a BetOnMarkets-like platform, but with triggers and more fair pricing. Imagine 2 One Touches, on both sides of the market, quoted below 55% each. Near them, a bit farther, but not too much, 2 No Touches, quoted below 55% each - they will be very near the One Touches. So the cost of the strategy will be below 220% , with a guaranteed output, if left to expire, of 200% in more than 90% probably of the cases. But, if triggers are enabled, you can sell each No Touch when the corresponding One Touch is touched. Say that 2 thirds of the time already passed, then volatility increases. The price crosses the upper One Touch barrier, you get 100%. On the lower side, the One Touch and the No Touch guarantee the second 100%, but since the upper One Touch has just expired ITM, you sell the No Touch. Most of the value is already gone, due to the delta loss (the market is near), but a lot of value has been added by the theta, because a lot of time ticked away. If you would sell this option more than 20% you are already at breakthru. If the market becomes more erratic and turns down hitting the other One Touch, you can kill its corresponding No Touch at an even higher value, taking a lot of profit.
With BetOnMarkets at least there are ways to profit from pretty sideways movements of the market, but a real platform for binaries, to allow really good set-and-forget hedging strategies has not been designed for retail...
The trouble with the european binaries is that they are too dumb. The expiry point is unique - that means there is only one result of a binary strategy involving european binaries. Using american binaries, however, there are many outcomes of an option strategy, depending on which barriers are touched and which not. Reconstructing the same behaviour with european binaries is not quite possible, because at the barrier, for instance, american one touch option has 100% output and finishes ITM at that time, while the corresponding european binary has just a maximum delta, there fore selling an european binary at the barrier point to mimic an american binary is completely pointless.
But the problem comes from the imposed standards and limits that come from the brokers.
The largest degree of liberty is offered by BetOnMarkets. You can only buy options, not sell them, but they compensate offering a pretty good, though not as it should, range of options: One Touch/No Touch , Stay Between/Goes Outside. The missing class is Double Touch/Double Contra - which was removed about 2 years ago and which was crucial to have better hedging strategies.
So, on BetOnMarkets you can pick a wide range of expiries - starting from 5 minutes ; also, you can pick whatever barrier you want. On SaxoBank you can both buy/sell options, but the expiries are almost weekly and barriers are distanced by 100 pips. SaxoBank only offers One Touch/No Touch. No platform offers triggers.
Hedging with BetOnMarkets is pretty simple, though the lacking triggers and the lacking Doubles class is making it too hard to even attempt. For instance, you can hedge two near One Touch options with a Stays Between. You will have a cost of about 130% and an output of 100% if no barrier is touched or only one is touched. If both barriers are touched, the output is 200%. This is just one example. My favorite option was the Double Contra - which pays out in full if the 2 barriers that compose it are not both touched - allowing for a lot of One Touch/No Touch games around the possible price paths.
Finally, a correct hedge strategy to capitalize on theta gain could be on a BetOnMarkets-like platform, but with triggers and more fair pricing. Imagine 2 One Touches, on both sides of the market, quoted below 55% each. Near them, a bit farther, but not too much, 2 No Touches, quoted below 55% each - they will be very near the One Touches. So the cost of the strategy will be below 220% , with a guaranteed output, if left to expire, of 200% in more than 90% probably of the cases. But, if triggers are enabled, you can sell each No Touch when the corresponding One Touch is touched. Say that 2 thirds of the time already passed, then volatility increases. The price crosses the upper One Touch barrier, you get 100%. On the lower side, the One Touch and the No Touch guarantee the second 100%, but since the upper One Touch has just expired ITM, you sell the No Touch. Most of the value is already gone, due to the delta loss (the market is near), but a lot of value has been added by the theta, because a lot of time ticked away. If you would sell this option more than 20% you are already at breakthru. If the market becomes more erratic and turns down hitting the other One Touch, you can kill its corresponding No Touch at an even higher value, taking a lot of profit.
With BetOnMarkets at least there are ways to profit from pretty sideways movements of the market, but a real platform for binaries, to allow really good set-and-forget hedging strategies has not been designed for retail...
Interactive Brokers
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Thomas Peterffy, founder of Interactive Brokers, has just released: I will tell you about a practical
way to think about options without complicated mathematics.
https://www.interactivebrokers.com/en/index.php?f=5910
way to think about options without complicated mathematics.
https://www.interactivebrokers.com/en/index.php?f=5910
