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.

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1answer
87 views

Out-of-the-money options at expiration

It's taught that out-of-the money options that expire at the end of the last trading day expire worthless yet I see many expired options in trading hours that hold their value and continue to trade. ...
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38 views

Can companies raise cash by selling covered call options on their treasury stock?

Suppose a company has lots of treasury shares. Can it raise cash by selling call options covered by the treasury stock? If the stock price ends below the strike price of the calls sold, then the ...
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121 views

Stock Options in Exchange for Salary

I received an offer letter with with the option to convert part of the salary to stock options as per the below table. Base salary is ₪33K/month (Israeli Shekel). Be aware of '₪' vs '$' in some ...
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0answers
27 views

Reporting of 1256 Based Options

I live in the United States. In 2015 I have traded several 1256 based options. The details of each trade were not included in my 1099 and not imported into Turbo Tax. I understand that this is to be ...
2
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2answers
345 views

Why are there no exchange traded options on 3x leveraged ETNs

Since these would help me manage risk in my personal financial portfolio, why are there no exchange traded options on 3x leveraged ETNs? Is there a prohibition that the SEC is perpetuating? Is there ...
1
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1answer
60 views

Do European put options sell below intrinsic value in the real world?

I understand that it is possible for a European put option to trade below its intrinsic value (i.e. assuming a positive risk-free rate, the theoretical lower bound of a European put is lower than its ...
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0answers
49 views

Settlement Period for options pre 1993

I was reading Settlement Period and wondering what was the settlement duration for options pre 1993. For equity/etf, it seems it was five days. So for options, was it four days ? , any verifiable ...
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1answer
134 views

By what mechanism can I short a commodity without the use of futures of that commodity?

I live in the US and I work for a company that is heavily related to a particular commodity X. As such, when I began working for them, I signed a document stating that I would not purchase stock/ETFs/...
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1answer
85 views

FX options for retail trader

I would like to trade options on the FX market, say EURUSD and GBPUSD. I have seen that there are options on the CME that have FX futures as underlying and also some options on spot on the ...
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0answers
17 views

Warrant extension - would this have any tax implications?

If someone has warrants to purchase shares in a private C corp in the US, if they were about to expire and they got the company to agree to extend them, does this have any tax implications? These are ...
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0answers
34 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% ...
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1answer
140 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 ...
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1answer
261 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 ...
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2answers
80 views

If the price of an option is $2.40 how much does it cost to buy?

Does it take $2.40 to buy an option priced at $2.40 or does it take $240.00 to buy an option priced at $2.40?
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14 views

Does selling a related option affect the holding period for tax purposes?

Imagine the following scenario: I purchased 3 LEAP call options on XYZ in 2019 with a strike price of $200.00, expiring over a year from purchase in 2021. I also sold 3 call options on XYZ in 2019 ...
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1answer
20 views

Calculating maximum loss on options spread including early assignment and margin calls

Most trading platforms provide a maximum loss calculation for options spreads, but this does not account for the possibility of early assignment which could lead to losses from margin calls, overnight ...
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1answer
13 views

Do compound options trade on exchanges or do they only trade over-the-counter?

Do options on options (i.e. compound options) trade on derivatives exchanges? Or are they only traded over-the-counter? If they do trade on exchanges, which exchanges do they trade on?
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1answer
18 views

Options Strategy for Calculating Limit Price on a Vertical Spread

Is there a best strategy for calculating limit price on a vertical spread? Using the average of the bid and ask prices seems to lead to a lot of orders that do not get executed.
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35 views

Using the Spread Hacker the Thinkorswim platform

I was wondering if there was a way to screen for spreads that actually have bids or spreads with at least a decent bid/ask spread so I can get filled. From the TOS help page: The Spread Hacker is ...
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2answers
50 views

In Options call does the strike price matter if the intent is to buy the stock?

Lets say, I want to buy a call option whose underlying stock has long term potential but there are some near term risks. I want to wait and see how the stock performs for a few months and buy if it is ...
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0answers
37 views

What happens to my Long Put (Bought Puts) when company file chapter 11

What happens to my long put that i buy for Dec 2020 if the company files for chapter 11 in Nov 2020 or before option expiration. Would I be able to sell those long puts to get maximum reward for ...
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0answers
31 views

How to run a active long vol. strategy

Suppose I'd like to have 10 % of my portfolio allocated to "long volatility" either by rolling straddles or buy x % monthly OTM options when market is up or down y %. Obviously going all in on one ...
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2answers
24 views

Is there limit on number of Covered Calls Transactions?

I have 100 shares of XYZ. I felt today it’s going to be Bearish Trend, so I opened a position, STO call at $10.00 (2 Weeks Expiry). Next day premium value is $5.00 and it’s going to be Bullish again. ...
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1answer
53 views

negative delta for bull put spread

I am working on bull put spread. Currently the spot is way below both the strike prices. So one strike is deep in the money and other is in the money. Net position delta retrieved from Bloomberg for ...
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1answer
112 views

Can't place Buy orders, only Sell orders are allowed

I am new to trading and probably don't understand as well how the market works at certain limits. I was trying to trade on IQ Option on a commodity (Oil WTI) to place a buy order, but it failed ...
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2answers
51 views

You are losing on your option. How should you decide if you should sell and cut your loss, or hold till expiry?

Presume that you're losing money on your options. To keep this general, I assume nothing about the relationship between current, strike, and the contract price. How can you decide between selling now ...
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29 views

How do settlement times and Reg T work for options exercise and assignment in a cash account?

If I have a position in a standard PM-settled equity/ETF option in a cash account, are buys and sells of the underlying due to exercise or assignment treated the same as any other stock buys and sells ...
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2answers
130 views

Why should I buy a principal protected note from the bank when I can create one on my own?

I was looking at principal protected notes (PPN) at a bank (link: CIBC Principal Protected Notes). It says: The return of your CIBC PPN depends on the performance of the underlying assets. (It ...
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2answers
46 views

Holding all other parameters constant, why is theta higher for ATM calls than for ATM puts?

Compare theta for ATM puts and ATM calls with all other parameters (e.g. volatility, strike price, price of underlying, risk-free rate, etc.).
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39 views

Long put options in TFSA: can I close the position by selling, or must I exercise?

Suppose I use my TFSA to buy 10 American put options on XYZ at a strike price of 20 when the market price of XYZ is 20. I am 100% sure this is allowed under the rules governing TFSAs and registered ...
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1answer
34 views

How to think about correlation between multiple outstanding options trades

I'm just getting into trading options. I think it would be sensible to ensure that my multiple outstanding trades at any given time are not correlated so that if I lose on one, I am not more likely to ...
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60 views

How are options used to avoid capital gains taxes on shares?

This question is based on this quote from another online resource. I had been reading about common methods of tax avoidance for the super wealthy, and this one didn't make sense to me. One cunning ...
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1answer
44 views

Bear call spread break even

So I opened my first position last week, a small min risk one to try and see what I don't understand, and it's took a while to improve but things look ok now: https://imgur.com/a/9NKDVVr For ...
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1answer
43 views

Long term LEAPs with calls written against them

I bought 3 LEAPs on XYZ at various times in 2019 which all expired in 14-17 months. I intend to sell or donate them once they reach long term status. However, I also wrote 3 CALL options on XYZ that ...
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22 views

How to find the most efficient gamma and vega hedging

I want an options position where I can short some options to pocket the premiums and benefit from the time decay. I also want to be vega and gamma neutral. Is there an established way to find which ...
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1answer
74 views

What is the effect of a short stock position on the value of an option?

I'm reading the book "Option Volatility and Pricing" by Natenberg and there is a paragraph I'm having trouble understanding. Chapter 7 (Risk Measurement 1), Page 98, Paragraph 2: The value of a ...
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126 views

Nadex binary option - trading at excessive prices?

I recently came across Nadex and in particular their binary option markets. Such an option pays off $100 or $0 depending on whether a specific exchange rate exceeds a strike price at a specific date. ...
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60 views

Arbitrage strategy for a given put option price

Binomial Option pricing model question In the following question, S0 = stock price at time t = 0, u = up factor, d = down factor. r = risk free interest rate. Stock price at time t = 1 is either S0*...
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1answer
90 views

What happens to long otm oex puts if you exercise them?

Since OEX index options are cash settled and are American style, what would happen if you decided to exercise an out of the money put? Would you end up paying the difference between the strike and ...
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1answer
238 views

Expected stock price move using IV

From this post https://www.projectoption.com/expected-move-explained/, he uses the following formula to calculate a 1 SD move in the stock: How do you know which stock option to use for this? For ...
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1answer
171 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 ...
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49 views

Yuan USD Option

Are there any possibilities for a retail investor to buy a USD/Yuan option other than the ones on the CYB ETF and those from Goldman Sachs? The idea is to bet on a lagre depreciation of the Yuan.
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302 views

Hong Kong Dollar Options

I would like to bet on a de-pegging of the Hong Kong Dollar from the USD. Even though the volatility is perfect for an options trade, it seems hard to find any for the retail investor. Is anyone aware ...
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166 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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134 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 puts/...
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1answer
312 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 ...
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2answers
42 views

Writing ITM Call Option For Extra Profit

Say I buy 100 shares of XYZ at $20 a piece, and it rises in price to $25 a share. Is there any downside to writing/selling an ITM call option at a strike price of $25/share as far as I can in the ...
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84 views

Do any options strategies make money in the long run?

As far as I can tell, one can only make money in options in the long run under two conditions: You take advantage of arbitrage opportunities You have better insight into the distribution of prices of ...
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2answers
127 views

How implied volatility affect options pricing?

TSLA between 23 and 24 October 2019 had their earnings report. TSLA mark price on 23 October was 252$. On 24 October, half an hour after market open reached 297$. as we saw around 44$ push. if ...