Writing futures options uncovered...

[optsonly]

marameo:

Hopefully some of the experts that were ripping on me previously can answer your questions.

Since I am writing far out of the money with a few months until expiration with the sole purpose of collecting premium vs. time decay. I can't help you here. For me to monitor the greeks it would be useless. I could pick the lowest delta option but the premiums are so low for those that they would not be worth the risk.

Jump right in here people, waiting on you....

 

[marameo]

Since I am writing far out of the money with a few months until expiration with the sole purpose of collecting premium vs. time decay. I can't help you here. For me to monitor the greeks it would be useless.

Well,I understand you point. I'd like to monitor the fair delta because I am focused on delta hedging, such as synthetic long/short straddles (long-term).

 

[rsh01]

Whenever there is a Strong Bull signal, I will look to Write a Naked Put on it,
although sometimes I'll Buy a Call instead

Conversely, if there's a Strong Bear signal, I will usually look to Buy a Put
although I will sometimes Write a Naked Call instead.

hi RE, what makes you choose one or the other? anything fundamental or is it intuition - or a conviction that you are more right and thus want to profit more from buying rather then writing?

any other option type strategies you trade eg condors / straddles etc?

 

[optsonly]

marameo:

Roger that. I am not holding the contract so no hedge here. I'm writing the options uncovered. Hopefully someone will reply for you.


For the mud slingers of my original post: Stocks - News & Commentary

Check out the option play recommendation for Dec corn. Give him a call and tell him he's an idiot also if you want.

Time for me and my smoking hot wife to grab some sushi...

 

[Windlesham1]

I like options in long/short combinations and have a method that suits me. I'm still a rubbish trader and forget to leave limit orders with my broker,however.
Options trading is dead simple:if you don't like the prices,don't take the trade, once you have learned how the Greeks work and done your calcs( I like iVolatility.com simple calculator). If the underlying has an implied vol of 20% you can make a reasoned choice about the options when vol is at great variance.
IE does the market expect more upside? I don't think anyone has a clue right now as the politicans are meddling with markets,and lying like a wotsit about the real state of the global economy.

 

[Martinghoul]

Hi,
I have a question about greeks I'd like to ask here so that I don't have to start a new thread. Once I know the spot price, option price, style, riskfree rate, date at moment of writing and maturity date I can obtain IV and then, delta etc...by running the formula up-side-down, correct?

Now, suppose I want to calculate greeks (delta mostly) for long-term option, say DEC12, does it make sense to use the current spot price in the formula, or should I use the DEC12 futures settlement price?

I am concerned on this because the delta will indeed change If I either use spot price or the future price sharing the same maturity date

What is the underlying for the option? The fwd price of the underlying is the right price to use. If we're talking about a Dec12 expiry option onto Dec12 futures, Dec12 futures price should be used.

 

[marameo]

What is the underlying for the option? The fwd price of the underlying is the right price to use. If we're talking about a Dec12 expiry option onto Dec12 futures, Dec12 futures price should be used.

I am talking about FTSE100 options, so the underlying is supposed to be the index cash market. That's what confuses me...

 

[Martinghoul]

I am talking about FTSE100 options, so the underlying is supposed to be the index cash market. That's what confuses me...

The underlying can be the cash mkt, but, like I said, the right price to use is the fwd price of the underlying. That means futures.

 

[marameo]

The underlying can be the cash mkt, but, like I said, the right price to use is the fwd price of the underlying. That means futures.

Ok, now please consider the case where there is not fwd trading for a given expiry (that is not the case for FTSE100, I know); whay should I do? Say, for NOV12 options there is not NOV12 future trading. Could I just obtain the synthetic underlying (or future) by going thru the following: strike+call-put (maybe ATM) from NOV12 options? All in all, a synthetic future should already price in dividends and suchlike.

Thanks

 

[Martinghoul]

Ok, now please consider the case where there is not fwd trading for a given expiry (that is not the case for FTSE100, I know); whay should I do? Say, for NOV12 options there is not NOV12 future trading. Could I just obtain the synthetic underlying (or future) by going thru the following: strike+call-put (maybe ATM) from NOV12 options? All in all, a synthetic future should already price in dividends and suchlike.

Thanks

Yes, although that's circular... Generally, the equity index fwd for any given expiry date is easy enough to compute (with varying degrees of accuracy). There are some issues arnd the computation, but we don't need to get into that.

In your case, however, it's a bit different. If I'm not mistaken, FTSE futures options have monthly expiries, but the underlying contracts are quarterly. So for your Nov12 expiry option, the underlying should still be Dec12. You should check the contract spec, though, as I could be wrong.

 

[Martinghoul]

Actually, correction, I lie... FTSE options are quoted on the cash index, rather than the futures, so you do need the Nov fwd. From what I am seeing it should be arnd 5800 or 5802.70. You can compute it as discussed above.

 

[optsonly]

Flat right now.

Watching the grains to sell calls on. Russian wheat problems still giving a bump there. 950 resistance is the area to watch.

Corn....Rains and cooler temps did little to slow that one down but the current news is starting to sound just a little 'has the top been reached' sort of.

Oil is even more of a political commodity. Anything for votes I guess.

 

[optsonly]

December coffee looks like it is trying to find a bottom.

Dec Wheat and Corn took big hits today...watching those call premiums.

If the Dec corn breaches and closes below 780 area 750 looks like next target there. Still a lot of weather psychological volatility within the grains. Longer term weekly charts offer little help because of the extreme run up on the daily charts in corn. Wheat = double top from around May 2011. Strong down bar forming on the weekly. 850 on the downside probable target area.

3 foot ground swell rolling in on the beach....see ya.

 

[optsonly]

Grains up minimally overnight after Friday crop progress report. Will sell calls on Dec corn if no strength today.

 

[optsonly]

Sold the CZ 12 1000 calls for $400