This tag is to be used for any question on Options, A more specific tag [put-options, call-options, options-assignment, option-exercise] should be used when appropriate.

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1answer
32 views

Does implied volatility always rise as earnings announcements approach?

Often, implied volatility of options rise as an earnings announcement approaches. Does this principle hold true regardless of whether the earnings are expected to be good or bad? Also, usually IV and ...
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1answer
55 views

3% Equity options in software company, entitles me to revenue share?

We are a software company and have a partnership with another software company that gives us components to implement within our software and now they want to buy the intellectual property from us, ...
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1answer
29 views

Do equity options trade outside regular hours, similar to after hours trading for some stocks?

Is there an after hours trading market for equity options also, similar to that of the equity market? I am specifically interested to know if BB (TSX) and BBRY(NASDAQ) options trade outside regular ...
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0answers
12 views

How does volatility skew affect out of money option prices

If underlying is at 100, let us say the 100 call costs 5.00 and the 105 call cost 2.00. Also let us say that IV of the 100 call is 20% and because of skew, the IV of the 105 call is 30%. So how does ...
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4answers
8k views

Does the Black-Scholes Model apply to American Style options?

After reading the Wikipedia article on the Black-Scholes model, it looks to me like it only applies to European options based on this quote: The Black–Scholes model (pronounced /ˌblæk ˈʃoʊlz/1) is ...
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0answers
24 views

How to decide on the proper strike and expiry month while opening a long box spread

In theory, I should be able to open up a long box by selecting two strikes where the debit required is less than the difference between the strikes, then hold the box to expiration and get back an ...
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1answer
17 views

Offsetting the tax on vested RSUs with short term capital loss

For sake of simplicity let's say I vested 100 shares from RSUs, that triggered a stock sale of 40 shares at $10/share to cover tax withholding of $400. Is it possible to offset the $1,000 gain ...
1
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1answer
92 views

What is the maximum number of options I can buy if the price is $0.01?

In options trading, the lowest price for one call option can be as low as $0.01, for example for one contract which expires in a year. My question is what is the maximum number of options I can buy ...
1
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1answer
68 views

valuing options

So in my finance textbook I have the following question: T-bills currently yield 5.5 percent. Stock in Nina Manufacturing is currently selling for $70/share. There is no possibility that the stock ...
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1answer
27 views

Are there option strategies that exploit mergers and acquisitions events

Are there any option strategies that can profit from mergers,acquisitions and buyouts? I don't mean insider trading, I mean after the news is out but the deal has not taken place yet, are there any ...
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2answers
72 views

Is the delta hedging technique of any use for a retail trader

As a retail trader, does it make sense to hedge an option position by taking an opposing position in the underlying? If I buy a long call and short an equivalent number of the underlying so that the ...
0
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1answer
60 views

How is a long call and short stock portfolio equivalent to lending money

In his book 'Volatility Trading' Euan Sinclair writes that a hedged portfolio of long call and short stock is equivalent to lending money. He did not provide much clarification, so I am wondering, ...
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4answers
907 views

Why would someone buy a way out-of-the-money call option that's expiring soon?

I swing trade equity options every once in a while for fun. This morning I witnessed something I do not understand at all. In the attached photo, why would someone purchase 6 contracts for .05 at ...
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1answer
97 views

Trade stocks in USA

What are the conditions for foreign citizens (and non-residents) to trade on American exchanges? I believe it's possible, but don't know the conditions...
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0answers
43 views

How can I affect implied volatility of an option?

Implied Volatility represents the actual above-market premium an option contract trades for at any point in time, but it changes in mysterious ways. If I wanted implied volatility to be higher, could ...
0
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1answer
37 views

American trade Hong Kong financial markets (specifically index options)

How can an American get access to the Hang Seng index and index options? This trades in Hong Kong, but really exposure to Hang Seng stocks and derivatives (and index options) in general would be good. ...
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2answers
62 views

If an option's price is 100% made up of its intrinsic value, is there a way to guarantee a non-loss while having a chance at a profit?

Let's hypothetically say that a stock is trading at $153, and I can buy its $150 call option for $3. If I shorted 100 shares of the stock and bought 100 options, then I would be guaranteed to break ...
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2answers
63 views

How does delta of an option change with time if underlying price isconstant

In his book 'Option Volatility and Pricing', Sheldon Natenberg writes that if an option has a delta of 92 with 3 months to expiry; and then 2 months pass and the underlying contract does not change in ...
0
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1answer
21 views

Guidelines for scaling into an options position

What are some guidelines for scaling into an options position when the position has moved in your favor, and you are looking at a paper profit of ~ 5% (arbitrary number). Do you just double up? Are ...
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0answers
19 views

How to improve risk/reward profile of a calendar spread position

In a calendar spread (short front month ATM option, long back month ATM option), you want the stock to be right at the short strike at front month expiration. Too much movement from the short strike ...
2
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3answers
237 views

What would the broker do about this naked call option?

Let's say there is a stock of ABC currently at $8, and I sell a (naked) call option on it, with a strike price of $10 and expiration in two months. Suppose my broker lets me do this if I have 50% of ...
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0answers
35 views

How to consider the effect of margin call risk in a gamma scalping strategy

I am trying to tippy toe into volatility trading and volatility strategies. So I was reading Sheldon Natenberg where he starts off with a portfolio of long ATM call and short 50 shares of stock to ...
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1answer
63 views

How does a person with a large equity in a company hedge his risk

How people like Bill Gates , who has the bulk of their wealth tied up in MSFT shares, hedge their downside risk in case the share price tanks? If he were to buy put options like the rest of us, it ...
0
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1answer
30 views

Covered call and put options as separate trades

Let's say I write a covered call and a buy separate put option. After a period of time, the call expires, leaving me with the underlying stock. Thereafter, the market price went down and I can ...
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0answers
40 views

What happens if futures contract seller defaults?

I'm considering buying a put future to hedge against interest rate increase. I know there is a certain level of protection from default as required by the contract, but I assume the risk is not zero. ...
0
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1answer
18 views

Is an ITM option bought/sold to close in addition to being assigned?

I'm a little unclear on what happens to in-the-money options on expiration. I know the option will get assigned, but does it also need to be bought/sold to close? For example, say I sell a covered ...
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1answer
49 views

How can retail stock and options traders find trades with a clear defined positive edge

A retail trader of equities and options may believe that his technical signals and fundamental analysis is superior and smarter than the other retail traders. Maybe for some it is true. For a lot of ...
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0answers
44 views

Should I use futures or options to hedge my long SPY position?

If I am long 100 shares of SPY, what are some questions that I can ask myself to decide: Whether I should hedge by selling futures, or by buying put options? What are some pros and cons of each?
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1answer
88 views

Why do deep in the money options trade below their intrinsic value?

I have an investment account where I'm currently holding about $200K in SPY shares (S&P 500 index). I'm a bit worried that we are in a bubble, so I'm looking into strategies to hedge my downside. ...
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0answers
16 views

How much does the volatility change for a 1$ move in the underlying

Is there a quick and dirty way to approximate how much the volatility of an underlying would change for a 1$ move in the underlying. The individual option Greeks measure the sensitivity of an option ...
0
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1answer
29 views

Estimate a future option price given greeks and a 1$ move in underlying

Let us say underlying is at 50$, and the 50 call is at 0.50. delta=0.5, gamma =0.5, theta = .02, vega = .10. I apologize if these numbers are not realistic, I am very poor at Greeks. My question is: ...
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0answers
40 views

How to hedge volatility decreases

My particular options positions are typically a long delta, and long vega. Decreases in implied volatility, or specifically the VIX, can drastically alter the profitability of my position. Is there a ...
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2answers
58 views

Why deep in the money options have very low liquidity

I understand that OTM options with low deltas are not that attractive, hence liquidity is less. But how about deep ITM options, why is the liquidity not there? Deep ITM options are a cheap way to ...
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0answers
32 views

Received Stock options as UK Employee, however exercised the stock as a Canadian Employee. What is my tax liability?

I work for a global company. As a UK resident, my company awarded me stock options & Restricted stock. The stocks is traded on the NYSE. I exercised the stock in Canada. I transferred to the ...
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3answers
2k views

Why won't my retirement account let me write a “covered put”?

My retirement account (a traditional IRA) will let me write a covered call, where I sell a call option if I have the underlying securities (for instance, 100 shares of IBM). The shares are required to ...
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vote
2answers
60 views

Do I just let an options conversion/reversal trade go to expiration?

Let us say I lock in a small riskless profit using a conversion. Which means (as an example), I sell a call, buy a put and buy stock, and net a credit of .20. What do I do next? Do I just let the ...
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2answers
144 views

Can a Covered Call be called away before the expiration date?

Scenario: If I hold 100 shares of XYZ, I can sell 1 XYZ call. Let's say the current price of XYZ is $50. What if I sell a call with strike price $45? Does that mean the underlying owner can call away ...
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2answers
46 views

Does an understanding of synthetic options give any edge to the retail trader

What are some practical applications of synthetic option positions for a retail trader? One can always memorize synthetic relationships. But how does understanding a synthetic relationship help the ...
4
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2answers
130 views

Why do options skip May/June?

I notice a lot of stocks aren't offering options for May. Many aren't offering for May and June. Is there any reason for this gap?
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2answers
47 views

Risk and reward of a synthetic option position

I am trying to understand option synthetics. This article mentions: For example, if your stock is at $100 per share and the you sell a 105 Call and buy a 105 Put, you have zero risk (and zero ...
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0answers
12 views

Profit and loss graph of long call with many days to go before expiry

The profit and loss graph for a long call is the well known hockey stick. I understand the reason for this shape at expiry. But what is the reason that as more days are there to expiry, the curve ...
0
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0answers
17 views

Can an individual investor easily trade options for NASDAQ-CM equities?

When I look at a NASDAQ-CM-listed company on my broker's site (or on Yahoo/Google Finance pages), there are no option prices listed. Is there some way for an individual investor to buy/sell ...
3
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3answers
1k views

Do stock option prices predicate the underlying stock's movement?

I am trying to understand if my thinking is correct or not. I am looking at a stock that is @ $10.00. When I look at the options on the stock $11, $12... calls are all down today and $11, $12... ...
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0answers
35 views

a “fully” American option strategy?

Is there such a thing as an American butterfly spread? For a European butterfly spread simply buying 1 put with strike price X+a, 1 put with strike price X-a and shorting 2 calls with strike price X, ...
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0answers
27 views

Is the education provided by OIC good

Does anyone have experience with the educational courses provided by options industry council? What is the quality of the material? Is it just another option course talking about some magic ...
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2answers
160 views

What are some ways to mitigate the risks of covered calls?

When covered calls work, they seem great. However, there is a chance that the stock will tank, turning the 5% profit into a 50% loss. What are some ways of mitigating the risk of a stock dropping ...
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0answers
15 views

Retail bokerage sites that can help with Flex/CFlex Options?

Does anyone know if there are retail brokerage companies that can help with creating Flex/Cflex options? I am looking to create LEAPs on an ETF. I found the following link about "List of CFlex 2.0 ...
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2answers
116 views

Trading : how to deal with crashes (small or big)

i'm currently learning how to trade both manually and with EAs. I have questions : i'd like to know how to deal in the probability of a price crash like in 1987 (and many others): Is using a right ...
0
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1answer
41 views

Why at the money option has higher theta than out of money option

Why is the theta highest for the option at the money(22.50 in the screenshot), but decreases as we go further out of the money? I understand that ITM have little time value, so they will have small ...
0
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1answer
83 views

Why gamma scalping is not advised for retail traders with reg T margin

I am trying to understand gamma scalping Why does the author say: Only traders who are very well capitalized, very knowledgeable and experienced, and who have retail portfolio margining should ...