# What to do on option expiration???



## shooter (23 January 2008)

Hi all

I am a newbie just got an internet trading account recently. I've got some questions about what to do on expiration. From my understanding, I cannot close out options on expiration to realize the profit (or can I?). I can either exercise or allow it to expire worthless. 

Suppose I have an in the money put option on expiration. Do I actually need to buy the underlying share from the stock market and sell it to the writer straight away to obtain the profit? If so, it's very incovenient since I have to have the money to buy the undrlying share to start with. Similarly for in the money call option on expiration. Do I actually have to buy the share from the writer then sell it to the market straight away??


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## moXJO (23 January 2008)

shooter said:


> Hi all
> 
> I am a newbie just got an internet trading account recently. I've got some questions about what to do on expiration. From my understanding, I cannot close out options on expiration to realize the profit (or can I?). I can either exercise or allow it to expire worthless.
> 
> Suppose I have an in the money put option on expiration. Do I actually need to buy the underlying share from the stock market and sell it to the writer straight away to obtain the profit? If so, it's very incovenient since I have to have the money to buy the undrlying share to start with. Similarly for in the money call option on expiration. Do I actually have to buy the share from the writer then sell it to the market straight away??




you dont need the money you have 3 days (T3)


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## happytrader (23 January 2008)

shooter said:


> Hi all
> 
> I am a newbie just got an internet trading account recently. I've got some questions about what to do on expiration. From my understanding, I cannot close out options on expiration to realize the profit (or can I?). I can either exercise or allow it to expire worthless.
> 
> Suppose I have an in the money put option on expiration. Do I actually need to buy the underlying share from the stock market and sell it to the writer straight away to obtain the profit? If so, it's very incovenient since I have to have the money to buy the undrlying share to start with. Similarly for in the money call option on expiration. Do I actually have to buy the share from the writer then sell it to the market straight away??




Hi Shooter

If you are talking about American style ETO's you can close out at any time before expiry to realise a profit or loss.

Cheers
Happytrader


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## sails (23 January 2008)

shooter said:


> Hi all
> 
> I am a newbie just got an internet trading account recently. I've got some questions about what to do on expiration. From my understanding, I cannot close out options on expiration to realize the profit (or can I?). I can either exercise or allow it to expire worthless.
> 
> Suppose I have an in the money put option on expiration. Do I actually need to buy the underlying share from the stock market and sell it to the writer straight away to obtain the profit? If so, it's very incovenient since I have to have the money to buy the undrlying share to start with. Similarly for in the money call option on expiration. Do I actually have to buy the share from the writer then sell it to the market straight away??




Shooter, you can sell your long options (puts or calls) on the open market up until closing time on expiry day.  One of the reasons  I sometimes exercise a long option is if the bid/ask of a deep ITM are very wide and where too much money could be lost in trying to get a fair price from the market maker. 

Some option friendly brokers do allow you to exercise your puts without sufficient funds in the account and then give you some time the next day to sell the shares without incurring any penalties.  How much time they give varies considerably between brokers.  

Also, check on fees for exercising - some brokers are horrendously greedy with a high percentage fee on the share transaction, where as others such as OptionsXpress charge only a flat fee of $33 (last time I checked anyway!).  Remember there are two share transactions when exercising - one when you exercise and the second when you close the share position.

I haven't done this yet in Oz options, but it you feel you need to exercise to get the full value of your option (taking fees into consideration), it may be possible to actually sell the shares the same day you order the exercise instead of waiting until the next day.  You would definately need to talk this over with your broker as they may not understand how it works - or have rules preventing it - or whatever!

Very difficult today (and yesterday) as MMs are not quoting - not even on BHP, our most liquid optionable stock.  They are not responding to quote requests and I believe they are supposed to respond to 80% of them.  So it may not be easy to sell your put options on the open market today.  If you do attempt it, suggest you put in a limit order rather than a market order!

If you decide to exercise, talk to your broker and make sure you know exactly their conditions, fees, penalties, funds required, how long you have to close the share position.  Make sure you are well informed!

Hope this helps!


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## noirua (23 January 2008)

It is always best to ring up and ask the company secretary what the position is on expired options. Also check carefully all the paperwork you have received as quite often the answer is hidden there somewhere. 

Some companies will sell your expired options and send you any sum due to you. 
One company I held shares in did this on some occasions but not always. 

AS my Nan used to say "You've got a tongue in your head, USE IT!"


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## wayneL (23 January 2008)

noirua said:


> It is always best to ring up and ask the company secretary what the position is on expired options. Also check carefully all the paperwork you have received as quite often the answer is hidden there somewhere.
> 
> Some companies will sell your expired options and send you any sum due to you.
> One company I held shares in did this on some occasions but not always.
> ...



This refers to company options, not ETOs as I believe the OP was referring to.


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## shooter (23 January 2008)

Thanks everyone they are very helpful! 



sails said:


> OptionsXpress charge only a flat fee of $33 (last time I checked anyway!).




By the way I checked the fee. The standard rate of optionXpress is $2.80 per contract, subject to a $27.95 minimum per trade, plus ACH Fees. I also have an ETRADE account charging the standard rate of 0.55% of trade value, subject to a $44.95 minimum per trade,plus ACH Fees. 

I did a little calculation and if I'm right, the ETRADE fee is only cheaper if the price of an option is lower than $0.51 and more than 16 contracts on the trade.



happytrader said:


> If you are talking about American style ETO's you can close out at any time before expiry to realise a profit or loss.




What about Eurpean style???  Can it be closed out at all????


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## alphaman (23 January 2008)

sails said:


> Very difficult today (and yesterday) as MMs are not quoting - not even on BHP, our most liquid optionable stock.  They are not responding to quote requests and I believe they are supposed to respond to 80% of them.



That's what I find most frustrating with options.


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## wayneL (23 January 2008)

shooter said:


> What about Eurpean style???  Can it be closed out at all????



European style options can be closed out at anytime, they just cannot be exercised before expiry.
(providing the MMs give you a quote... )


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## sails (23 January 2008)

shooter said:


> ...By the way I checked the fee. The standard rate of optionXpress is $2.80 per contract, subject to a $27.95 minimum per trade, plus ACH Fees. I also have an ETRADE account charging the standard rate of 0.55% of trade value, subject to a $44.95 minimum per trade,plus ACH Fees.
> 
> I did a little calculation and if I'm right, the ETRADE fee is only cheaper if the price of an option is lower than $0.51 and more than 16 contracts on the trade. ...



Yes, those fees are for trading options.  However, if you did decide to exercise, then the fees in Oz are usually based on equity commissions.  Eg 1 x BHP $36 put option = $36,000 in value of underlying shares - commissions for exercising are more likely based on that amount with Etrade rather than the option price as in their option commissions.  Then you have to sell the shares again - so double that fee. 

 Gets a bit tricky as they all have different fee structures and the difference in fees for exercising can be considerable between brokers.  I think the ones that overcharge hope newbie traders won't notice


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## sails (23 January 2008)

alphaman said:


> That's what I find most frustrating with options.




Unbelievable at the moment.  I currently have a number of option positions in BHP and usually have little difficulty in adjusting them - MMs normally respond quickly to option quote requests if they aren't making a continuous market - but the last two days have been a nightmare as the MMs have mostly disappeared en masse and no response to quote requests. Very difficult to trade when one has no idea of mid prices.  I have heard they are supposed to  respond to 80% of quote requests - but totally ignoring them is unacceptable IMO.

I think my days trading Oz options are numbered...  It's tough enough with the high fees here in Oz, data fees and slippage without having MMs disappear two days before expiry!

I mentioned in another post that my broker suggested emailing a complaint to the ASX and to get as many traders as possible to do likewise...


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## moXJO (25 January 2008)

sails said:


> Unbelievable at the moment.  I currently have a number of option positions in BHP and usually have little difficulty in adjusting them - MMs normally respond quickly to option quote requests if they aren't making a continuous market - but the last two days have been a nightmare as the MMs have mostly disappeared en masse and no response to quote requests. Very difficult to trade when one has no idea of mid prices.  I have heard they are supposed to  respond to 80% of quote requests - but totally ignoring them is unacceptable IMO.
> 
> I think my days trading Oz options are numbered...  It's tough enough with the high fees here in Oz, data fees and slippage without having MMs disappear two days before expiry!
> 
> I mentioned in another post that my broker suggested emailing a complaint to the ASX and to get as many traders as possible to do likewise...




I think the rise of cfd's have taken a good chunk out of the options market in AUS not as liquid as it once was.I use to call through to the broker I was using to get the price if it was not up on screen.


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## sails (25 January 2008)

moXJO said:


> I think the rise of cfd's have taken a good chunk out of the options market in AUS not as liquid as it once was.I use to call through to the broker I was using to get the price if it was not up on screen.




Yes, I did call my very helpful broker and they couldn't get quotes either from the MMs.  They also called the exchange to find out what was going on but it would appear the ASX maybe powerless to enforce their own rules as nothing changed for a couple of days.

In 5 years of Oz option trading, I've not seen this happen for so many days and especially going into option expiry when there is usually an increase in liquidity - with BHP anyway.

I have zero tolerance for this sort of incompetency and consequently am in the process of checking out US options.  Hopefully with so many exchanges over there, not likely to lose all the MMs together


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## GreatPig (25 January 2008)

An interesting comment in Guppy's newsletter this week:



> We regret to inform readers that for all intents and purposes, the Australian warrant market is dead ... we see the market makers are generally the only people active in these warrant series. In some cases there are no bid or ask, or the spread is so wide - $0.01 buy to $0.12 sell in one warrant - that trading is madness.



He seems to be big into CFDs now, especially with the current volatility and lack of a trend.

GP


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## wayneL (25 January 2008)

sails said:


> I have zero tolerance for this sort of incompetency and consequently am in the process of checking out US options.  Hopefully with so many exchanges over there, not likely to lose all the MMs together



The only thing you'll miss is the closer strike intervals.


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## sails (26 January 2008)

wayneL said:


> The only thing you'll miss is the closer strike intervals.




Thanks Wayne - I am considering GOOG to replace BHP. The $10 wide strikes on a $600 stock seems farily comparable to the $1 wide on BHP when also taking into consideration the 100 vs. 1000 contract size.  Currently using the TOS demo then will trial live with a small account.   I'm also interested to see how much slippage one loses with US options vs. Oz - hopefully there will be some improvement there as well as the cheaper fees.  Anyway, will be an interesting exercise at least!


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## wayneL (13 February 2008)

sails said:


> Thanks Wayne - I am considering GOOG to replace BHP. The $10 wide strikes on a $600 stock seems farily comparable to the $1 wide on BHP when also taking into consideration the 100 vs. 1000 contract size.  Currently using the TOS demo then will trial live with a small account.   I'm also interested to see how much slippage one loses with US options vs. Oz - hopefully there will be some improvement there as well as the cheaper fees.  Anyway, will be an interesting exercise at least!



sails,

Re the strike interval issue. You're probably aware that the index etf options such as QQQQ, IWM & SPY have $1 strike intervals. There is actually a whole bunch of sector, overseas index & commodity funds, all with $1 strike intervals... some with nice vol too. Check it out:

http://cboe.com/Products/OptionsOnETFs.aspx


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## sails (13 February 2008)

wayneL said:


> sails,
> 
> Re the strike interval issue. You're probably aware that the index etf options such as QQQQ, IWM & SPY have $1 strike intervals. There is actually a whole bunch of sector, overseas index & commodity funds, all with $1 strike intervals... some with nice vol too. Check it out:
> 
> http://cboe.com/Products/OptionsOnETFs.aspx




Thanks Wayne - was actually checking out the CBOE site today looking for info on NDX which I eventually found at CME.  

It's not so much the width of the strikes - more how much the stock moves through it's strikes.  I like to be ratioed slightly for protection (both calendars and butterflies), so some healthy movement often means being able to reduce the initial debit a bit.

After the limitations here in Aus for liquid options, it's a bit overwhelming with the choices in the US!

Have a small live account open now, so checking out real fills with one lots.  Got a small live position on AAPL which got filled quickly near the mid point.  Had trouble getting filled on GOOG - tried on several occaions, but couldn't get  filled. Got as far as 80c higher than the mid price (on a 4 legged combo) - and that is much worse slippage than here on BHP (eg 8c). So cancelled the order and went looking for something else.  

Have heard NDX is pretty good for butterflies and seems to fit some of the criteria I'm looking for.  I have found out they are American style, but cash settled and looks like they settle on the 3rd Thursday of the month rather than the Friday.  Have you traded NDX or know any more about them?  Any traps for the unwary?

Here in Aus, I mainly traded BHP and occasionally the banks for calendars / butterflies as core strategies, depending on IV conditions - and then just adapted as necessary.  With so many more choices in the US, plus good scanning software all for free, I expect there will be many more opportunities.

Just got to get used to the partial night shift - that's the toughest bit!


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## wayneL (13 February 2008)

sails said:


> Thanks Wayne - was actually checking out the CBOE site today looking for info on NDX which I eventually found at CME.
> 
> It's not so much the width of the strikes - more how much the stock moves through it's strikes.  I like to be ratioed slightly for protection (both calendars and butterflies), so some healthy movement often means being able to reduce the initial debit a bit.
> 
> ...




As a general rule of thumb, spreads are tighter on the equivalent ETF. For instance you will get tighter spreads on QQQQ than on NDX, and tighter spreads on SPY than SPX.

Re moving through strikes, check out ETFs like QLD which is a leveraged QQQQ, or some emerging market funds like EEM, even some of the commodity based ETFs will move much like BHP. Even good old QQQQ or IWM themselves are as volatile as many Aussie blue chips.

Anyhoooz there for the taking if useful.

Cheers


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## wayneL (13 February 2008)

PS

Here is the CBOE page for NDX... and QQQQ for comparison.

http://www.cboe.com/Products/indexopts/ndx_spec.aspx

http://www.cboe.com/micro/ndx/qqq.aspx


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## sails (13 February 2008)

wayneL said:


> As a general rule of thumb, spreads are tighter on the equivalent ETF. For instance you will get tighter spreads on QQQQ than on NDX, and tighter spreads on SPY than SPX.
> 
> Re moving through strikes, check out ETFs like QLD which is a leveraged QQQQ, or some emerging market funds like EEM, even some of the commodity based ETFs will move much like BHP. Even good old QQQQ or IWM themselves are as volatile as many Aussie blue chips.
> 
> ...




Thanks muchly for the links and the above info.  Will check out your suggestions early tomorrow morning when the US markets are trading so I can see what volumes and bid/ask spreads are like.

Looks like the info I got from CME differs somewhat to that from the CBOE - NDX opts are european and settle on the 3rd Friday.  Must have made a mistake. 

Cheers


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## wayneL (14 February 2008)

Jeez NDX spreads have tightened right up since I last looked... competitive with QQQQ now

And with NDX = 40 x QQQQ, brokerage is much cheaper on NDX.

Can be hedged with futures too.

hmmmm


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## sails (14 February 2008)

wayneL said:


> Jeez NDX spreads have tightened right up since I last looked... competitive with QQQQ now
> 
> And with NDX = 40 x QQQQ, brokerage is much cheaper on NDX.
> 
> ...




LOL - might be of interest to you!

I did put a one lot butterfly in live and was surprised to get a fill near mid price regardless of the spread.  Still don't know if they let you in, but play games when you need to get out!  

I agree re brokerage - need far less contracts to do the same job.  Yes, good for hedging, but haven't yet looked into that - will have to find out if it is available with TOS.  

One other thing - do you find the spreads widen a bit during the middle of the US trading day?  If so, do you know what times are generally best to get better fills?


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## wayneL (14 February 2008)

sails said:


> LOL - might be of interest to you!
> 
> I did put a one lot butterfly in live and was surprised to get a fill near mid price regardless of the spread.  Still don't know if they let you in, but play games when you need to get out!
> 
> ...




Yes a little, First half hour or so, they can be a bit wider is less liquid series.


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## sails (14 February 2008)

sails said:


> ...Looks like the info I got from CME differs somewhat to that from the CBOE - NDX opts are european and settle on the 3rd Friday.  Must have made a mistake.
> 
> Cheers




Hi Wayne, received an email from TOS with expiration reminder and confirms Thursday as last trading day for NDX but uses Friday morning's opening prices - that will be interesting - need a good crystal ball  



> February expiration is Friday the 15th. The last trading day for many cash-settled index options such as DJX, SPX, NDX and MNX options is Thursday, February 14th, with settlement prices determined by Friday morning's opening prints for the component stocks. The last trading day for the OEX, XEO, ETFs and all equity options is Friday, February 15th.




Got filled on another level of butterfly for NDX - good fill near mid price again.  I'm a bit sus as most things that are too good to be true usually are - so will stay with one lots until I find where the gremlins are hiding 

PS realised this thread has gone a bit off topic - perhaps the posts on US options should be separated?


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## cutz (30 November 2008)

sails said:


> Unbelievable at the moment.  I currently have a number of option positions in BHP and usually have little difficulty in adjusting them - MMs normally respond quickly to option quote requests if they aren't making a continuous market - but the last two days have been a nightmare as the MMs have mostly disappeared en masse and no response to quote requests. Very difficult to trade when one has no idea of mid prices.  I have heard they are supposed to  respond to 80% of quote requests - but totally ignoring them is unacceptable IMO.




Hi Sails,

I’ve been trawling through the options pages and back in Jan I noticed you commented on the fact that market makers weren’t providing quotes on normally liquid aussie series, have things improved since then or is the situation in slow decline?

Also I was just wondering if pinning my efforts to the aussie market will end up being a lost cause due to this problem or do you reckon liquidity will slowly improve over the next couple of years.

I’m guessing that due to the market mayhem a lot of traders have bailed out exacerbating the situation.


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## sails (30 November 2008)

cutz said:


> Hi Sails,
> 
> I’ve been trawling through the options pages and back in Jan I noticed you commented on the fact that market makers weren’t providing quotes on normally liquid aussie series, have things improved since then or is the situation in slow decline?
> 
> ...




Hi Cutz,

Yes, it was a nightmare at the time - I had a multi-level arrangement of sold butterflies (front month) on BHP in January this year.   If you look at a BHP chart, you will see a volatile low on the 22nd Jan 2008 (3 days before expiry) which took the lower debit vertical into a potentially healthy profit.  But the MMs would not quote that day and wouldn't respond to option quote requests either - and this went on into expiry on the 25th.  

I heard that the MMs were fined for it, but it was generally thought that any fine was pocket money and the MMs would prefer to pay the fine than take risks with so much volatility.  So, I guess it's going to have to be pretty volatile before they pull the quotes for days like that again.  

I then quit the Oz options market and started trading the US.  Loved the liquidity, the totally free, magical software from TOS, the wonderfully low fees (got the ticket charge removed) and the ease of ordering, but those night time hours were hopeless as I couldn't get enough quiet to sleep through the day and way too many interruptions.  So it's a case of having to make it work in Oz.

I am now more prepared should it happen again and it is definitely more likely on volatile market lows and down gaps.  If there are no quotes say first thing in the morning when the MMs are unlikely to quote and say I want to sell some long puts, I try to estimate IV levels.  Eg. take note of IV levels of individual options (mostly using Iress option calculator) on market lows.  It is likely to repeat that level next time it goes down and it gives an IV estimate to plug into the Iress calculator.  Also, I look for any trades that have already gone through that are not crossed trades or tailor/custom-made trades to see what IV levels they are trading at.  Obviously only a guide as we may not know if they were buying or selling.  Anyway, then I place an order above my guesstimate if I'm selling and carefully tick it down if necessary - rarely do I buy on market lows when IV is exceptionally high!

I'm not finding it any worse at this time.  If volatility is high, MMs are slow to begin quoting in the morning and then sometimes only quote one side which you have probably already noticed.  However, they mostly respond to option quote requests which is something. 

Whether the Oz market is ultimately OK for your needs I guess only time will tell.  If circumstances change for me, I would very quickly go back to the US markets as they are so much better.

Hope this helps!


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## cutz (30 November 2008)

Thanks for taking the time for a detailed reply Sails,

Luckily for me I haven’t caught out yet, even with illiquid series like CSL, but the thought of being unable to close out days before expiry sent chills up my spine, that why your post caught my attention.

That spike on BHP you mentioned was not unlike the recent one on the 20th
of Nov, on that day I was playing around with XJO options, from memory the spreads were wide but at least they were on.

Hopefully we don’t see a repeat of what happened to you.


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## Grinder (30 November 2008)

Yep, sounds like we're all singing the same song. Only XJO for me now, with the occationally bank or mining stock to mix it up a bit.


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## sails (1 December 2008)

cutz said:


> Thanks for taking the time for a detailed reply Sails,
> 
> Luckily for me I haven’t caught out yet, even with illiquid series like CSL, but the thought of being unable to close out days before expiry sent chills up my spine, that why your post caught my attention.
> 
> ...




You are welcome, Cutz.  I hope it doesn't happen like that again.  But if it does, have a go at working out volatility.  Slippage is obviously going to be bad, but it is likely you could still get out but probably at a worse price than normal.  I wouldn't think MMs would turn their nose up at a profit on their side. 

Even in high volatility, hopefully the MMs will at least fulfill their obligations.  It puzzles me that they don't make the Oz market more competitive as so many Oz options traders only trade the US.  You would think they would want the business.

Same goes for the ASX exchange fees - that $1.12 is a shocker for every single option trade and couple that with a fair whack of slippage on every trade - it doesn't make sense why they don't become more competitive...  Oh well,  they must have their reasons


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## mazzatelli1000 (1 December 2008)

Just thought I would vent some anger on Aussie options even though I may be sidetracking this thread

I hate the fact that 1 option contract in Oz = 1,000 shares


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## sails (1 December 2008)

mazzatelli1000 said:


> Just thought I would vent some anger on Aussie options even though I may be sidetracking this thread
> 
> I hate the fact that 1 option contract in Oz = 1,000 shares




But then Oz shares are generally lower priced than in the US - and US option fees aren't that cheap if you trade US lower priced stock.  At least there is the opportunity to trade the likes of Google and other higher priced stocks.  NDX options are another that is pretty good value for the fees paid due to it's high price.

Imagine how many contracts on the likes of TLS, LGL, etc - they are almost not worth trading now IMO because of their low price and the increased no. of contracts required to bring a similar profit as some of the higher priced shares (or at least used to be!).

If they dropped it back to 100 spc, can't see the ASX or brokers being willing to cut back on fees by one tenth - would probably see it as an opportunity to help themselves to a bit more - better left alone methinks


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## mazzatelli1000 (2 December 2008)

sails said:


> If they dropped it back to 100 spc, can't see the ASX or brokers being willing to cut back on fees by one tenth - would probably see it as an opportunity to help themselves to a bit more - better left alone methinks




Ha!!
I agree - they would probably charge $1.12 per 100 spc.
The mods should bury this post otherwise it will give them ideas

When I first started trading options - I found the leverage on Oz options unbearable (I was so paranoid of being assigned :couch especially when trying to trade BHP options). I think that has stuck with me ever since I so may possess some unreasonable bias.:

BTW for anyone interested --- OptionsXpress will not be providing the service to trade ASX options and shares from the 31st December 2008.


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## sails (2 December 2008)

mazzatelli1000 said:


> Ha!!
> I agree - they would probably charge $1.12 per 100 spc.
> The mods should bury this post otherwise it will give them ideas
> 
> ...





LOL Mazza, assignment isn't all bad news - although it would depend on how savage the broker is on fees.  It's great for debit spreads where assignment on the short means max profit without having to battle for a fair price 

That's a shame about OX - but would explain why they weren't improving their system for the Aus market.  There were no longer a primary broker for me, but good as a backup - will have to look elsewhere...

Thinking about contacting Iress to find out when they are planning to make combo trading online.  I spoke to someone several months ago and they said it was on their list of planned developments, but they had other higher priorities at that time.  This ability to place at least a two legged combo online was one of the biggest advantages that OX offered, IMO.


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## Grinder (2 December 2008)

mazzatelli1000 said:


> BTW for anyone interested --- OptionsXpress will not be providing the service to trade ASX options and shares from the 31st December 2008.




That bites  Have to change again, OX was my third in 2 years. Who has the cheaper fees (FT discount) with spreads online, no whistles & bells. Just the bid/ask is all I need. I know we have discussed this many times but any simmilar recommendations?


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## mazzatelli1000 (2 December 2008)

sails said:


> LOL Mazza, assignment isn't all bad news - although it would depend on how savage the broker is on fees.  It's great for debit spreads where assignment on the short means max profit without having to battle for a fair price




LOL, 3 years ago... the memories - I was so petrified.
sails I recall Commsec was EXTREMELY savage on the fees (because I legged in and out of spreads)

All that led me to move to US markets, however I am always assessing whether to come back to my homeland 



sails said:


> That's a shame about OX - but would explain why they weren't improving their system for the Aus market.  There were no longer a primary broker for me, but good as a backup - will have to look elsewhere...
> 
> Thinking about contacting Iress to find out when they are planning to make combo trading online.  I spoke to someone several months ago and they said it was on their list of planned developments, but they had other higher priorities at that time.  This ability to place at least a two legged combo online was one of the biggest advantages that OX offered, IMO.




I have only heard of Morrision Securities and Trader Dealer from some folk who trade in Oz


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## Grinder (2 December 2008)

thanks mazz, have'nt heard of Morrison so will give em a buzz. Already spoken with IB, Commsuc, TD & Etrade. Etrade won't let retail traders trade the Index, go figure.


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## cutz (2 December 2008)

Hi Mazza,

If you don't mind me asking which broker are you using?


Grinder, 

For your info, morrisons seem good on pricing but when i spoke to them last i was advised that with naked shorts you need to phone through, if that's your cup of tea. Gee what sort of outfit is etrade if you can't even do the index.


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## mazzatelli1000 (2 December 2008)

Grinder said:


> Etrade won't let retail traders trade the Index, go figure.







cutz said:


> Hi Mazza,
> 
> If you don't mind me asking which broker are you using?
> 
> For your info, morrisons seem good on pricing but when i spoke to them last i was advised that with naked shorts you need to phone through




So the search continues for a good broker of Oz options

I cannot understand the reason why E*Trade will not provide index options yet they will allow naked calls and puts on equities  presume? 

Cutz, 
IB and TOS are my main brokers.


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## Grinder (2 December 2008)

frikin love TOS but it's US. Traderdealer is who I'm leaning towards, the others have yet to tick all my boxes... might have to drag my butt back to comsuc:crap:


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## cutz (19 March 2009)

G'Day,

Of course today is XJO expiry day, does anyone know how to get the settlement price just after all the stocks have opened?
I initially assumed the price was derived from the first XJO quote after 1010am but when i checked settlement prices against XJO quotes last expiry things didn't tally up.


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## sails (19 March 2009)

cutz said:


> G'Day,
> 
> Of course today is XJO expiry day, does anyone know how to get the settlement price just after all the stocks have opened?
> I initially assumed the price was derived from the first XJO quote after 1010am but when i checked settlement prices against XJO quotes last expiry things didn't tally up.




Hey Cutz - I'm not sure.  I asked a related question and put it in the prop shop thread - but no answer as yet.  https://www.aussiestockforums.com/forums/showthread.php?p=409354#post409354

I always thought that the MMs used the SPI to hedge XJO options - and they expire at the same time and on the same day.  

IB gives the last trade on the SPI today at 3463 - does that fit in better?


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## cutz (19 March 2009)

Hi Sails,

I don't know how futures expiry works but can i assume they have already settled?, they don't seem to be trading away from the price you just quoted.

If that's the case it should be interesting to see how it compares with the official XJO opening price index calculation when it's released.

Alternatively if anyone has access to previous SPI settlements, how do they compare with the table on the ASX site? http://www.asx.com.au/products/options/index_options_settlement.htm

Another thing i just noticed, the opening seemed to take longer today.


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## sails (19 March 2009)

Yes, the March SPI seems to have stopped trading about 10.15am.  Had a quick look on Bourse and previous XJO options settlements correlates pretty closely to SPI settlements.


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## cutz (19 March 2009)

Thanks Sails,

I was just wondering why there appears to be trading still happening on SPI Mar09,(looking at TWS) is this rollover activity only?


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## sails (19 March 2009)

Sorry, got it wrong - had to look it up.  SPI closes at 12md - some info here: http://www.asx.com.au/professionals/sfe_notices/sfe_notices.htm


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## cutz (19 March 2009)

Yep, 

That looks about right now, APH9 closing at 3464, XJOX3 (MAR 3400 CALL) had some trades go through at 64 points today, perfect.

I wonder how to get the official XJO OPIC just after the ASX opens, I guess it probably doesn’t matter as the expiring SPI contract appears to be pegged to it before 1200pm therefore acting as a good enough guide. The problem is XJO options expire monthly as opposed to SPI contacts which expire quarterly, so next month getting an accurate price may be a problem.

Any thoughts?


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## sails (19 March 2009)

With the SPI data easily available on IB, it would probably make sense.  I noticed this morning that the SPI price only seemed to hover between 3463 and 3464 after about 10.15am to 12md.

Sorry, don't know how it works for the months in between.


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## jackson8 (20 March 2009)

cutz said:


> G'Day,
> 
> Of course today is XJO expiry day, does anyone know how to get the settlement price just after all the stocks have opened?
> I initially assumed the price was derived from the first XJO quote after 1010am but when i checked settlement prices against XJO quotes last expiry things didn't tally up.




hi cutz
found this on a trading site , while site is based in the us. it may still be fairly similiar for aussie indexes
also have included link..

Calculating the Settlement Price

These indexes also have a final or closing price. But that price is NOT a real-world price determined at any specific time. Instead, the opening price of each component of the index is determined on the morning of the 3rd Friday of the expiration month. These options do not trade on Friday. The last time they trade is the previous day (Thursday afternoon). Once all stocks in the index have opened for trading on Friday morning, the settlement price is calculated – as if all stocks in the index were trading at that opening price at the same time. Because all stocks in the index never trade at their opening prices at the same time, the settlement price is not a real price. The official price is not published until hours after the opening (in some cases, not until the end of the day).  

Many times the official settlement price is higher than the day’s official high or lower than the day’s official low, resulting in confusion for traders who do not understand the process. This occurs because the index price is not a real world price. Suppose the market is bullish at the opening. Often, those buyers push stocks to the highest price of the day. When stocks open at different times, some stocks will have already begun to trade at lower prices, and the ‘current’ index price reflects those lower prices. But remember, the settlement price counts only those opening ‘high’ prices. Thus, the settlement price can easily exceed the highest price seen for the index during the day.  

http://blog.mdwoptions.com/options_for_rookies/index_options/


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## cutz (20 March 2009)

Thanks Gary,

Yep that's sounds like how the XJO opening price index calculation is done, some sort of algorithm of the opening prices of the individual components, so I guess you can have a slightly different settlement price then the XJO index just after the last of the stocks have opened.

I would be nice to somehow get the official settlement figure at 1015 expiry day.


BTW Interesting info on your link.


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