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At 19:45 20-10-00 -0400, you wrote:
>> Joe,
>>
>> I don't follow.....
>> I guess your tradingrisk is a certain percentage of your trading capital ?
>> Why not sell more contracts if the premiums are small ?
>> Or is there another reason that small premiums can affect this stategy ?
>> Questions, questions...
>============================================
>
>Franz;
>
>The bigger the option premium you collect, the bigger the cushion against
>adverse moves and the more dollars per day you collect due to premium
>erosion. I just know in 1998 I sold premium in excess of 100 points
>totalling both puts and calls. A similar strategy here looks like it would
>net something like 30 points in premium. In '98 the option price had built
>in a "crash scenario" in the puts that really sent premiums into orbit. It
>does not appear to be the same this time.
>
>So I guess the short answer to your question is that the value of the
>options are not hyper inflated as they were in '98 so risk is higher and
>reward is lower now. So its not as good a trade.
>
>Gitanshu could probably explain it a lot better then this. I do not trade
>options very much.
>
>joe
>
>==================================
Hallo Joe,
I think I understand what you mean. But still, if you sell 3 times as many
contracts as you did in '98 you would still collect about 100 points. And
your risk will be the same in points, or in a percentage of your trading
capital !?
On the other hand the absence of a "crash scenario" this time could mean
that the probability that we will go lower now (NASDAQ to 1800) is greater
than in '98 ?? Interesting....
And what is the difference in volatility of the underlying index between
'98 and now ?
I mean the higher the volatility, the higher the premium or ..?
Rgds.
Frans
>
>
>>
>> Rgds.
>> Frans
>>
>> At 11:11 20-10-00 -0400, you wrote:
>> >Re selling SP futures straddle. Just checked out the option premiums and
>> >could not believe how small they were. I guess I expected something
>> >comparable to Oct 1998 when this strategy was wonderful for me. I should
>> >have checked before I wrote. Sorry.
>> >
>> >=======================================================
>> >
>> >Joe Duffy wrote:
>> >"Since were only talking about opinions here, I'll throw my thoughts in.
>It
>> >"feels" to me very, very much like October 1998 at the bottom in both SP
>and
>> >Nasdaq. I think the low is in personally. I am considering a strategy of
>> >selling puts on the SP futures with a strike below the recent low, and
>> >simulataneously selling calls on the SP futures with a strike around the
>> >recent highs or a bit lower. I think that we are likely to see trade
>> >increasingly less volatile and more in a trading range for the next few
>> >weeks. If we did break lower I would cover the short puts and hopefully
>> >cover off most of that loss by staying short the calls. But really, I
>think
>> >it stays in the range, so that I will profit on both sides of the
>equation.
>> >When implieds are this high, it is the time to do this type of strategy"
>> >
>> >
>>
>>
>
>
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