Questions tagged [option-strategies]

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41 views

optimal OTM option

Lets say ABC is at 200. If I expect that ABC will be 180 by December, and I can only purchase 1 put option, what would be the most OPTIMAL put option to purchase? This is a question I've had - im ...
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4answers
197 views

Value of a call option spread

In this example: An options trader believes that XYZ stock trading at $42 is going to rally soon and enters a bull call spread by buying a JUL 40 call for $300 and writing a JUL 45 call for $...
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5answers
4k views

Why naked call writing is risky compare to Covered call?

I know that with a covered call you own the underlying and sell a call and with a naked call you don't own the underlying. Either way, if the underlying finishes in-the-money, you are assigned and ...
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0answers
125 views

Using options to profit from underlying stock and warrants

I'm a suffering shareholder and have underlying stock and warrants (3 years remaining) and want to know how to profit from them using a option or hedge strategy. The current stock price is 30% below ...
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5answers
5k views

Why buy a vertical spread if I could instead buy a naked call?

If I believe a stock will go up, say from a price of $100, and I wish to execute an options strategy that would make me money if the stock were to rise, why would I want to setup a vertical spread ...
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4answers
895 views

Comparison between buying a stock and selling a naked put

Suppose one wants to invest in company X, whose stock is selling for, say, $100/share. What are the differences in profit potential between buying 100 shares and repeatedly selling a naked put at ...
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5answers
3k views

How liquid is options market?

My strategy involves making profits from an increase in implied volatility on long straddles/strangles. Enemy: Time decay I am aware that the time decay accelerates. I read that for a 9 month ...
2
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1answer
188 views

Why do some expiration dates have more open interest for options?

Looking at the options market I noticed that some expiration dates have a lot more open interest than others. A good example is April 15th. Almost every company I've looked at has a very large open ...
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2answers
300 views

Trading intraday fluctuation vs. volatility-based option

Recently a question was asked about actively trading stocks based on small fluctuations in price. It seems like if you wanted to do the strategy described here, you might as well buy an option like a ...
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3answers
602 views

Emulating a 'long straddle' without buying or selling Options?

If I go long and short a stock simultaneously, with a 1:50 leverage, and place a stop loss on both for when a 10% loss is reached, isn't this the exact same principle as the long straddle strategy ...
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2answers
54 views

Is there an online tool to help purchasing option spreads? [closed]

I'm pretty new to futures trading and I'm wondering if there is an online tool to help look at various spread options contracts? I'm interested in getting some experience trading futures with pretty ...
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1answer
491 views

How does a dividend announcement affect a option straddle position

If I buy an at the money straddle, hoping to profit from a volatility increase, then how does an underlying dividend announcement affect my PnL? I am thinking that if the underlying announces a ...
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0answers
185 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
136 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
1k views

What strike to choose if I want to sell weekly calls against a long LEAP put

I am looking at this strategy of selling weekly calls against long LEAP put options The strategy seems good to me. Quite an improvement over the regular collar strategy. What I do not get is why ...
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2answers
5k 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. ...
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3answers
2k views

Dividend arbitrage using in the money puts

I was looking at dividend arbitrage It seems all I need to do is find stocks with a nice dividend(e.g KO). Then find an in the money put where the time premium is less than the dividend to be paid. ...
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3answers
576 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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2answers
607 views

Does dividends lead to early assignment of put option, or just call option

Is it correct to say that I risk early assignment only when I am short calls, not short puts? Because the option owner will want to buy stock to capture the dividend, he can only buy it by exercising ...
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4answers
874 views

Is a naked put really that risky

The word 'naked' in relation to options is synonymous with unlimited risk. But 'naked' puts are limited risk, the risk is limited to the strike price. So , why is it classified in the same category by ...
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1answer
3k views

How many naked option contracts can I write if I want to use maximum margin

Let us say I want to write a naked option on SPX in my interactive brokers margin account. If this is the only position I wish to hold in my account, and I want to use maximum margin, then what is the ...
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2answers
336 views

Option settlement for calendar spreads

Hypothetical: let's say it's Jan 17, 2015 and AAPL is at 100. My portfolio contains: Long 1 Jan 23, 2017 Call Option for AAPL at 60 Short 1 Jan 17, 2015 Call Option for AAPL at 90 20,000 USD cash ...
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1answer
530 views

Do I need to close out an in-the-money short straddle?

If I am short both a call and a put with the same strike on the same security, what happens if I let this position expire in-the-money? How much, if any, cash would I need to have liquid at ...
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1answer
56 views

Clarification on options jargon regarding spreads

Is it true that a bull put spread is the same as a credit put spread. Because if I am bullish, I wont be buying the put spread, I will be selling it, so it has got to be a credit spread. Similarly , ...
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1answer
195 views

Putting a calendar spread as a limit order

If I want to put on a calendar spread as a limit order at interactive brokers, am I allowed to specify a limit price for the spread, or do I need to specify limit prices for each of the individual ...
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1answer
253 views

Covered call vs naked put in online brokerages

If a covered call has same risk profile as naked put, how come brokers allow covered call but only allow naked puts to experienced traders?
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2answers
5k views

Are option contracts subject to mark to market rules

When I buy or sell an option contract, am I subject to futures style mark to market rules...i.e if the position moves against me, will the broker issue a margin call to put up additional collateral, ...
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2answers
141 views

What happens to the put option (longer expiration) of a collar if the call gets assigned?

Assuming a collar strategy where I buy the underlying stock with a short call and long put option on it. Would the call be assigned away like a covered call, leaving the put option viable or would the ...
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2answers
3k views

Is an iron condor always preferable to doing a simple credit spread

What is the advantage of using a regular credit spread (bull put or bear call spread) over an iron condor? The minimum profit for an iron condor will be at least the same as a simple credit spread (...
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2answers
1k views

Risk involved in buying LEAP put and selling short term puts against it?

Let's say company A is currently trading at 100. I bought to open 10 puts for company A at 100 strike price in Jan 2015. What risk am I exposed to by selling shorter term weekly puts (strike < ...
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2answers
246 views

Do I have to pay MLP distribution if short via option?

If I sell a naked put on VLP, do I have to pay the partnership distribution if I'm holding the option when the distribution is declared?
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1answer
7k views

Difference between naked put, covered put, protective put

If I buy a long put without holding the underlying, does it amount to a naked put? If I hold the underlying and buy a put, is that a covered put? Also if I hold the underlying and sell a put, is that ...
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4answers
936 views

Shorting versus selling to hedge risk

If you own 10K shares of stock XXX and you want to hedge your investment, isn't shorting some of your XXX identical to simply selling some of your XXX? Doesn't either approach reduce your risk in the ...
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1answer
729 views

Am I doing the math for this long straddle strategy correctly?

I'm looking at making a long straddle trade, and I'm trying to make sure I have the math correct before making the trade. Here are the details in the example I want to work out: I'm using options on ...
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1answer
3k views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
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3answers
3k 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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4answers
185 views

Are there any investment strategies which take advantage of an in-the-money option price that incorporates no “time value”?

I'm not sure if "time value" is the correct term, but if an option (still at least several months from expiry) is trading at the difference between its underlying stock's price and its strike price, ...
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1answer
430 views

What is the difference between a structured collar and a normal collar in finance?

How is a structured collar different from an ordinary collar? I failed to find information about the difference online.
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1answer
323 views

What does this mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT

can someone please explain what does this quote mean? SELL -10 VERTICAL $IYR 100 AUG 09 32/34 CALL @.80 LMT what is Vertical what is -10 what the 32/34 stands for? what is LMT
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2answers
608 views

Can I convert spread option into regular call or put?

I have bought spread call on stock X. After that point, the stock went up and came back. My short position is the same price as it was when I bought it 1 month back. At this point If I just clear out ...
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2answers
318 views

What is a straddle?

I have heard the term straddle when referring to options many times. What would it mean if I wanted to enter into a straddle position?
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1answer
132 views

Physical Delivery vs Assignment?

In options: What is the difference between the two? Assignment: http://www.investopedia.com/terms/a/assignment.asp#axzz1tG3VpKt8 Physical Delivery: http://www.investopedia.com/terms/p/...
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3answers
2k views

Options strategy - When stocks go opposite of your purchase?

I'm a bit new to options and would like to ask for someone's strategy opinion. Lets say that you buy a call at an expiration date 2 months or so from now, and in a few days you see the stock go flat ...
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1answer
169 views

How is Butterfly Trade Strategy good if the mid Strike price is already past?

In the trade example below - you have two buy put and two sell puts. One buy put is on 490 and the other is at 430, but also I am selling two puts at 460. Since the price range of AAPL already is on ...
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2answers
1k views

how do I calculate rate of return on call options that are spread

I want to do a leap spread on an existing covered call option. How do I calculate the rate of return to determine if it's worth doing the leap spread?
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1answer
128 views

Can you help identify/name this equity options strategy?

I am thinking of making such a trade: BUY PUT $590 MARCH WRITE PUT $600 APRIL I have done some reading and it looks like a diagonal put spread, but the diagonal put spread uses an out-of-the-...
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3answers
372 views

What option-related strategies are better suited to increasing return potential?

At this time I buy and hold stocks. In the few coming months I am considering a change in my investment strategy. If I reduce my diversification that will increase my risk. My financial coach (...
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2answers
4k views

Strategies to recover from a bad short-term call options purchase where the underlying dropped instead?

If I bought some short-term call options on an expectation that the underlying stock would go up, but instead the underlying stock declined some, shortly after my options purchase, what choices are ...
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1answer
220 views

How do straddles that involve selling options protect against early assignment?

When doing a covered straddle in options trading, it involves selling put and call options when entering the straddle. But there is no way of guaranteeing that your options won't be assigned before ...
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1answer
223 views

Can the bid price for selling the same call option in calendar spread be different from that in covered call?

I am trying to sell C (citi) call options expiring 2013 Jan at $5.00 in 2 different modes. Calendar spread mode: Bid Price is $0.24 Covered call mode: Bid Price is $1.01 1)Why is there a difference ...