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Questions tagged [options]

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.

3
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3answers
55 views

How to Hedge delta and gamma of a put option simultaneously?

Say you took a short put position of 100 options (as you feel the option is undervalued). This put has a Delta of -0.5, so to make the portfolio delta-neutral you short 50 shares of the underlying ...
-2
votes
1answer
54 views

Should I replace some parts of my portfolio with an option strategy?

I want to increase the percentage return of my portfolio even though it's almost meaningless in the total amount, and I don't mind making it a lot more complicated. I have a few brokerage accounts, ...
0
votes
1answer
62 views

Why are my funds locked up in my trading account while using bear put strategy?

Today I used a bear put strategy and I was surprised to see that some funds in my trading account were locked up as margin used. It is well known that the potential loss in bear put strategy is ...
1
vote
3answers
165 views

How to buy a contract for S&P 500 index?

I am researching writing covered calls on S&P500 index. So in order to sell covered call I need to buy a contract for S&P500 index. I've never traded indexes. What exactly I will be buying (...
0
votes
1answer
60 views

Iron Condor Profit Probability

I'm trying to see if I understand Iron Condors correctly and how to assess whether or not the risk is worth it for a given set of circumstances. The maximum profit on an IC is realized when all ...
0
votes
1answer
40 views

Is there a relationship between Post Hours Trading Volume spikes and Options?

So, I have watched a short video (https://www.youtube.com/watch?v=lXRAhoNd-50) of Lawrence McMillan talking about trading options on or near expiration. He discuss that arbitrageurs says that they buy ...
0
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0answers
32 views

Good sources for analysis of stocks and options trading [closed]

I am a beginner investor in the US looking to use some of my savings in the stock market. I personally do not have any financial background so I rely on analysis on popular trading sites like Zacks, ...
5
votes
1answer
1k views

Whats the difference between a qualified and an unqualified covered call?

I own various shares that I want to start writing covered calls on but I've heard about differences between "qualified" and "unqualified" covered calls. What's the difference? All I can find is that ...
3
votes
2answers
112 views

Why certain ETFs are popular( liquid) but Options on very same ETF are not

For example on comparing EEM/VWO , SPY/IVV/VOO etc and I always wonder why some ETFs are popular but options are not. I see a question How to pick ETFs that hedge against stock market crashes? that ...
1
vote
3answers
135 views

Who do you buy options from, if open interest is zero?

If open interest is 0, who will you buy an option contract from? And how the price is calculated? Also, initially, how the option contract price is determined?
0
votes
3answers
102 views

Credentials to discern “Sell to Open” or “Buy to Open” Option Transaction

I am curious how to gain insight into whether an option transaction was buyer or seller initiated, ie. "Buy to Open" or "Sell to Open". What I am looking for is not from a common retail investor ...
1
vote
1answer
120 views

Is there a Greek that describe the sensitivity of an option's time value to strike?

Is there a Greek that describes the sensitivity of an option's time value to the strike price? Or is option time value independent of strike? It's obvious that strike doesn't change once an option is ...
1
vote
1answer
166 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 ...
6
votes
4answers
12k views

How does a delta signify the probability of expiring in the money

I was watching this video on option greeks and the guy said (at 34 min): If an option has a delta of 34, it has a 34% probability of expiring in the money? Is it possible to understand it intuitively ...
0
votes
1answer
425 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: ...
0
votes
1answer
264 views

Calculating greeks from given option information

I have some software that spits out information about an option. Strike, underlying information, etc, but I cannot get the greeks using this software. Given that these are American options, is there ...
1
vote
1answer
53 views

No margin account and put expires ITM

This question is a followup to a recent and similar question on buying a put: When a long PUT expires in-the-money, whose shares are being sold?. Suppose I don't have a margin account, and I buy a ...
3
votes
1answer
190 views

Sold a call option and it expired out of the money and I was in debt?

this is just eating my brain away, I couldn't find the solution on my own so I'm here to see if anyone could help me. Today was the last trading day of options on VIX, I sold 5 Call options at 0.05 ...
0
votes
1answer
42 views

Difference between deltas of American vs European Call options

Is there a difference in the value of Delta of American and European options with the same underlying asset price, strike price, time to maturity? Also, is there any way to determine the price of an ...
2
votes
1answer
83 views

Equity vs Stock options?

I am a co-founder of a startup in the UK, the other co-founder wants to give me options instead of % equity because he believes when I eventually exit I will pay less tax and the company will too and ...
2
votes
4answers
86 views

What do option contracts look like?

Options are said to constitute in essence a legal contract for one party to buy or sell an assets at a set price in a future time. In modern trading, is there also an actual contract in fact, that is ...
2
votes
3answers
69 views

Why Options trading is charged on per contract basis

I have been trading options for years, but could not understand why Brokerages charge fee on basis of number of contracts. Per Fidelity : Trade for just $4.95 per online trade, plus $0.65 per ...
1
vote
2answers
44 views

Delta of a Vertical Spread | Slower than delta of long option?

People often prefer to trade options spreads rather than buying options, since those reduce your cost and have a defined profit and loss but what is the probability of success of a spread? For example ...
1
vote
1answer
58 views

Mortgage Holders as Option Writers

Can someone explain to me how does it benefit the mortgage holder to be a writer of the option call on the long term debt and the put option on real estate prices? Other than the premium be gained I ...
1
vote
1answer
36 views

payoff at expiration of a protective put

Hello the question I was asked was What is the payoff at expiration of a protective put (a portfolio consisting of one share of stock and one put option on that stock with strike price K) if the ...
2
votes
1answer
150 views

Long term option sell short term options against it

Company A is currently trading at $100. I bought 10 calls at a $110 strike price which expire in six months. What would be the best strategy (risk to reward) to buy or sell monthly options against ...
0
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0answers
23 views

Futures and premium

A stock will either go up to uS or down to dS next period. The risk-free rate is r. I'm using replicating portfolios to derive the premium on a futures contract with futures price F. What would the ...
4
votes
1answer
96 views

why some brokerage does not allow uncovered (cash secured) put via online order?

In past, I had brokerage accounts with Vanguard and I have option level approved for writing uncovered put( Level 4). I could place covered call orders via the website. But to place uncovered put ( ...
-1
votes
1answer
129 views

Buy pre ipo'd start up company stock in small amount? [closed]

Is there any investment website/company through which I can buy small amounts of pre-PIOed company stock in a smaller amount? Most require $100K worth of investment. e.g. as an average investor can ...
1
vote
2answers
124 views

Option trading for dummies

If I buy a $200 call option for $22 ($0.22) that expires in 3 weeks, with a current share price of $140, can I sell the option two weeks from now if the share price has reached $180? I'm asking ...
0
votes
2answers
1k views

Option spreads in registered accounts

Are there any option brokers for canadian people that allow you to do credit and debit spreads in their rrsp and Tfsa accounts?
0
votes
3answers
135 views

The math of this Investopedia article

I'm a little confused on how this article comes up with $650 instead of $700. From Investopedia. Consider the following example: XYZ is currently trading at $99.00 You own one XYZ Oct 90 ...
0
votes
1answer
261 views

Choosing a strike price when you sell a short combo

Often different stocks that I want to short are not on my broker's "easy-to-borrow" list, so they are unavailable for shorting. A couple weeks ago I got serious about option trading and I found out ...
1
vote
1answer
607 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 ...
2
votes
2answers
205 views

Closing out a Short Guts position where the put side has 0 volume and 0 OI

This spread may not even be available after the holiday is over, but here's my question: I found a high paying high probability guts trade. If you don't know, a short guts is selling an ITM put and ...
0
votes
1answer
105 views

Selling options on acquisition

I've been trying to understand this hypothetical scenario wherein a company in which you own options is acquired. In it, the author posits you own .67% and 20,000 shares ($2 strike price, $4 share ...
0
votes
1answer
34 views

What Happens to OTM Puts Following a Cash Aquisition?

Say I purchase OTM puts with a $5 strike and the underlying company is acquired through a tender offer that pays $19.00 cash per share. My contracts are accelerated and adjusted to reflect the new ...
0
votes
1answer
87 views

Spitznagel Black Swan Hedging

I am reading about how Spitznagel does hedging from Forbes - Protect your Tail. It's unclear to me how he is getting the returns he is claiming, Spitznagel's hedges mostly involve buying far-out-...
0
votes
1answer
50 views

Is it likely for large buy to open orders to be filled on thinly traded options?

Suppose you are very bullish or bearish on a stock but its options are thinly traded. Some stocks have an options market that doesn't exceed $200,000 even around earnings time. Say you want to ...
1
vote
3answers
116 views

Crash O Phobia and the reason for higher pricing of out of the money puts

In my stochastic finance course we are currently talking about Implied Volatility and Crash O'Phobia. According to Rubinsteins Crash O'Phobia, put-sellers attach a higher probability to the left tail ...
0
votes
1answer
62 views

Do I understand options open interest correctly?

I wasn't able to find a good example of how open interest works. Suppose at the beginning of trading period there is no open interest, these are the only trades made during these days, and all ...
0
votes
2answers
90 views

Neutral to bearish options strategy above stock price

If a stock is trading at $30 and I believe it will go no higher than $33, is there a spread that I can create above $33? This is a neutral to bearish strategy. I've looked at a debt put spread: ...
1
vote
2answers
96 views

Dollar Cost Averaging with At the Money Straddle

I was reading Dollar-cost averaging using an option strategy. Consider one month's investment of $30k. Looking at the VTI options, selling at ATM straddle expiring on June 21 worth $3.04 + $6.91 = $9....
1
vote
1answer
39 views

How to calculate return on capital for calendar year?

For an options portfolio, I'd like to calculate return on capital from Jan to Dec. These are monthly options that are held for a few days to months. There's a couple of problems with trying to ...
1
vote
2answers
63 views

Option Premium paid vs received

I understand what is the premium on an option. In case I acquire an option, the premium is considered as the price I pay to have the "right" to exercise the option. In case I sell an option, the ...
1
vote
0answers
31 views

Computing risk-neutral probability of spot rates

I am trying to use a binomial model to price options wtih bonds as the underlying security.If the current term structure is flat at 6%, but next year, I assume the one-year spot rate will be either 5% ...
2
votes
1answer
77 views

Are two options ever too similar for taxes?

If I buy an option, wait 3 months, sell it, and then buy it back the next day, "wash sale" rules will apply. But, what happens when these three actions use slightly different options (e.g., strike ...
1
vote
3answers
186 views

Why would anyone ever buy these call options?

I'm starting to learn the ins-and-outs of options. For the time being, I'm only interested in selling call options of index funds. Browsing through the available options in Robinhood for the ETF IVV (...
4
votes
4answers
137 views

What fundamental value do Options give the economy?

I had been wondering lately what the economic value that financial Options (Calls, Puts, American, Bermudan, etc) give to the economy is. In essence, what good do they give us, vs. simply trading the ...
1
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2answers
47 views

Probability of success in a Bull Callspread

Suppose I have a bull call spread where I am long on an ATM Call (+ 0.509 delta) and short OTM call (- 0.220 delta). What will be my probability of success in this trade?