Hi,
I have been investing in equities for a few years, and i tried covered warrants but wasn't too keen on their liquidity or how they're issued, now i'm looking at trading well known options strategies. I've done a fair amount of research over the last year or so, but there are still a few things which textbooks and online guides don't really explain.
1. The long straddle: sounds like a fairly straight forward strategy and all the textbooks introduce its basic parts, however few give worked examples, could someone show me? I looked at a straddle usinf ESX ftse100 options ATM, and the break evens were ridiculously far apart - i guess that's at expiration, but how are you supposed to unwind a long straddle position? (sell both parts when the going's good, or trade them separately).
2. Guides describe shorting put as having potentially unlimited losses, but surely the loss cannot be bigger than strike-0 ?
3. I've only recently gained access to watching price movements so please bear with me. The quotes seem to move pretty swiftly (for say near month ATM index options) but the number of fills seems to be quite low, is there something wrong with this picture?
4. I am told that many dealers simply quote volatilities instead of prices, and my broker IB displays many quotes like this through the TWS. I see where the text-book theory comes in, BS and all that, but how can dealers form such a specific view of volatility to 2 dp with such frequency?
5. And this is just a general interest one: how do institutions avoid paying stamp duty? During a brief spell at a hedge fund, a guy told me how no one in the City pays stamp duty, but i wasn't listening cos he had enormous man-boobs.
These are really naive questions, but i'd really appreciate any help on any of these.
I have been investing in equities for a few years, and i tried covered warrants but wasn't too keen on their liquidity or how they're issued, now i'm looking at trading well known options strategies. I've done a fair amount of research over the last year or so, but there are still a few things which textbooks and online guides don't really explain.
1. The long straddle: sounds like a fairly straight forward strategy and all the textbooks introduce its basic parts, however few give worked examples, could someone show me? I looked at a straddle usinf ESX ftse100 options ATM, and the break evens were ridiculously far apart - i guess that's at expiration, but how are you supposed to unwind a long straddle position? (sell both parts when the going's good, or trade them separately).
2. Guides describe shorting put as having potentially unlimited losses, but surely the loss cannot be bigger than strike-0 ?
3. I've only recently gained access to watching price movements so please bear with me. The quotes seem to move pretty swiftly (for say near month ATM index options) but the number of fills seems to be quite low, is there something wrong with this picture?
4. I am told that many dealers simply quote volatilities instead of prices, and my broker IB displays many quotes like this through the TWS. I see where the text-book theory comes in, BS and all that, but how can dealers form such a specific view of volatility to 2 dp with such frequency?
5. And this is just a general interest one: how do institutions avoid paying stamp duty? During a brief spell at a hedge fund, a guy told me how no one in the City pays stamp duty, but i wasn't listening cos he had enormous man-boobs.
These are really naive questions, but i'd really appreciate any help on any of these.
