42
votes
Accepted
Deep in the money put options
It costs you $584.9 x 100 = $58,490 to buy the put option.
You would instantly make $80,000 - $22500 - $58,490 = -$990
- 10.5k
41
votes
What happens if I do not honor a futures contract?
A futures contract is legally enforceable just like any other contract so the entity at the other end of the contract will have every right to sue you, extract fair recourse per the contract, and ...
- 2,023
35
votes
How do I bet that a stock price will not move?
There are several option positions based on non movement of the stock:
Sell a straddle (short the same strike put and call). Since both options are naked, you have open ended risk beyond the ...
- 76.9k
18
votes
What happens if I do not honor a futures contract?
The contract specifies the delivery, generally it is for the buyer to arrange for transport to his location. If the buyer doesn't pick up from the location, he is hit with warehouse charges and the ...
- 57.2k
15
votes
Why is XYZ $70.5 strike call more expensive than $68 strike call?
Is the price you are quoting the bid, ask, or last?
If this was the last, then the information could be days old. The bid or ask may be up to date pricing but the other side may have no interest at ...
- 78.5k
12
votes
Could an individual make money off of oil futures?
A million barrels of oil would be a high end tanker, and second hand prices seem to be about $60 to $100 million dollars, so there is a bit of a hole in the budget before you start thinking about ...
- 1,950
9
votes
Accepted
Buy or sell futures contracts
Buying (or selling) a futures contract means that you are entering into a contractual agreement to buy (or sell) the contracted commodity or financial instrument in the contracted amount (the contract ...
- 6,430
8
votes
Accepted
Do physical ETFs possess the same problems as CDOs?
Yes, I believe Burry's concern applies to physical ETFs as well as synthetic. The increasing popularity of passive investing via index-tracking funds means - according to Burry - that companies that ...
- 198
7
votes
Accepted
Reasons for a warrant's intrinsic value and price not adding up?
While on the surface it may seem that the warrant you described is trading below intrinsic value, there are many reasons why that might not be the case. It's more likely that you are lacking ...
- 31.7k
7
votes
Accepted
What is the Meaning of the Black-Scholes Value?
Using the data, the call option is $2.34, but what exactly does that mean? Does that mean the buyer has the obligation to buy the stock for $2.34?
No, a call option is when someone purchases the ...
- 21k
6
votes
Accepted
Does an equivalent to stock "options" exist for CDs?
I doubt it, since CDs are FDIC insured and mainly target retail savers/investors.
More sophisticated investors have bond options, interest rate options, caps/floors, and other interest rate ...
- 8,508
5
votes
Is this legal: going long on call options and artificially increasing the price of the underlying asset seconds before expiration?
Despite the fact that I think there is a litany of inaccuracies and misunderstandings related to quoted price and transaction price and the way prices move and assets transact; if you were able to, ...
- 49k
5
votes
Deep in the money put options
A long put gives you the right to sell the stock at the strike price.
The 2/05 '21 $800 put costs $584.90. You have the ability to sell the stock for $800 and based on your quoted price of $225, the ...
- 76.9k
4
votes
How does delta and gamma change in relationship to distance between strike and underlying price?
Options Greeks:
[]
Delta
As you can see from the graphs above, as absolute distance from ATM (At The Money) increases, the ratio represented by Delta begins to approach 0:1 or 1:1. Meaning, as ...
- 190
4
votes
Accepted
Is there a catch on this structured derivative product?
This type of structured product is called a capital protection product. It's like an insurance product - where you give up some upside for protection against losses in certain cases.
From the bank'...
- 140k
4
votes
Why is XYZ $70.5 strike call more expensive than $68 strike call?
The ticker is QCOM
The options you list expire on 2/16. On 2/15 when you wrote your question, QCOM was trading at 65.28. Unless the price jumps 10% tomorrow, those options will expire worthless. I'm ...
- 140k
4
votes
Why is XYZ $70.5 strike call more expensive than $68 strike call?
You could be looking at bad data.
You may be looking at the last trade which could have been second, minutes or hours ago.
The B/A spread on these could be wide while the option premium for nearby ...
- 76.9k
4
votes
Accepted
Confused about eurodollar futures
If they short the contract, that means, in 5 months, they will owe if the price goes up (receive if the price goes down) the difference between the price they sold the future at, and the 3-month ...
- 456
4
votes
Short an option - random assignment?
Actually, the process is not completely random. Rather it follows the OCC's assignment procedures:
The broker who is assigned in turn allocates their assignments among their customer accounts ...
- 5,123
4
votes
How can an option seller get out of a contract?
However, doesn't the sellers obligation to fullfill the put/call option still remain?
No. Buying to close effectively transfers the obligation to buy or sell the underlying stock to the party that ...
- 140k
4
votes
What is the Meaning of the Black-Scholes Value?
Black-Scholes is one of several pricing models that uses six variables to determine the theoretical value for an option. You mentioned five of them. You did not mention a dividend so it is assumed ...
- 76.9k
4
votes
What is option execution?
In general "executing" an option means doing whatever you have the option to do. For a lease with an "option" to buy - executing that option means buying the leased item (which probably means at least ...
- 140k
4
votes
Accepted
Derivatives/Options: Underlying Asset
Not sure what you mean by "normal" but the CBOE lists options on Exchange-Traded Funds. One example is options on the SPDR ETF.
I do not know of any options on mutual funds, but certainly an OTC ...
- 140k
4
votes
What is Derivative trading and why stock buying selling is not derivative
A derivative derives its value from another financial asset. But a company's stock derives its value, at least in part, from the real assets of the company (tangible and intangible), whose value is ...
- 30.2k
3
votes
Several questions on Bitcoin futures
Your questions are all basic futures questions, and not unique to bitcoin, so here's the explanations
And I don't see expected price between "betters" for the end of the contracts. I only see a ...
- 140k
3
votes
How to read options prices
This is exactly how I started, starting a simulation account on the CBOE website just to see what situation was profitable because it was all greek to me. Actually after learning the greeks, I realize ...
- 20.2k
3
votes
Does a list of all Option Strategies exist? Where can I find it?
A book I really enjoyed that opened my eyes to most combinations and the beauty of options was "The Bible of Options Strategies"
I had read a few abstract conceptual things about how options were ...
- 20.2k
3
votes
Can a warrant be "cancelled" by its issuer?
No - a warrant is, in effect, a contract between you and the issuer. If the issuer could just change the terms so that they're in their favor, then the option would have zero value. Any change to the ...
- 140k
3
votes
Accepted
What products can be used to insure against a large market drop?
Options will be the most cost effective method plus you have a predefined gain/loss profile. You said that this is not available for every security in your portfolio, so let's address those.
From a ...
- 847
3
votes
Accepted
Margin accounts and futures delivery
The flaw lies with bullet point #2. When you hold to maturity a long future contract position with physical settlement, you pay the final settlement price as calculated by the exchange for the ...
- 553
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