# Bank options



## clancyfish (25 September 2014)

What do you think the chances are of a small rally in banks heading into Oct?  I've bought some bank long calls in Sep for Oct expiry and now I'm looking like I'm fried...


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## pixel (25 September 2014)

clancyfish said:


> What do you think the chances are of a small rally in banks heading into Oct?  I've bought some bank long calls in Sep for Oct expiry and now I'm looking like I'm fried...




October is still a little far; today is Option Expiry for the September series.
For that, I expect most Majors to lift into the Close. e.g. for ANZ I could see today's Close just above $32.
Distribution of Open Interest in the October series would suggest that the Market agrees with you. With all due caution that things can change dramatically, the present equilibrium lies just above $33 for ANZ.
NAB's is however closer to $33.75 +/- 20c


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## clancyfish (25 September 2014)

Your analysis gives me faint hope...it ain't over till the fat lady sings.  I'm thinking that I will have to off-load at least a couple of weeks before time decay starts to kick in...would that seem right?


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## pixel (25 September 2014)

clancyfish said:


> Your analysis gives me faint hope...it ain't over till the fat lady sings.  I'm thinking that I will have to off-load at least a couple of weeks before time decay starts to kick in...would that seem right?




Buying Calls ...
It depends whether they're in or out of the money. Unless I really want to secure a guaranteed low price or am trying to add a few points above dividend yield, I leave options alone.
However, I do plot the current spread of Open Interest distribution and follow how it changes over time. That gives me some additional pointers about the Market Heavyweights' intentions around Expiry.


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## clancyfish (25 September 2014)

just gone o-t-m.

What do you prefer to trade?


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## pixel (25 September 2014)

clancyfish said:


> just gone o-t-m.
> 
> What do you prefer to trade?




straight mothers
and speccie penny dreadfuls
almost exclusively by technical analysis, using direction of price, volume, momentum


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## cutz (25 September 2014)

clancyfish said:


> What do you think the chances are of a small rally in banks heading into Oct?  I've bought some bank long calls in Sep for Oct expiry and now I'm looking like I'm fried...




Hello,

Which bank at which strike ?


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## clancyfish (25 September 2014)

NABX57 $34.00 strike price and WBCJ47 strike price $33.50...woeful.  Bought in early Sept.


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## cutz (25 September 2014)

clancyfish said:


> NABX57 $34.00 strike price and WBCJ47 strike price $33.50...woeful.  Bought in early Sept.




Yeah,

Nothing much you can do with that one other than hope for a huge rally between now and the end of October.

I was actually short the WBC calls, been kicking myself for closing out too early, didn't expect WBC to come off so much, guess all this talk about a property bubble is having an affect !


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## Sharkman (25 September 2014)

IVs have risen quite a bit over the last few weeks, 1m ATM for the big four all sitting mid-teens, they were barely above 10 at the start of the month from memory (i think CBA even got into the 9's at one point). if you bought at the start of sep, you would have got them at dirt cheap vol - so even if it doesn't come off (there's still a month to go - and it's a "long month" as oct expiry is the 30th - it may yet still work out for you) it wouldn't have been an expensive bet to make in vol terms. if that's any consolation at all. i find once IV goes up like this, chances are it won't drop back down quickly, so if the stock rallies and gets close to your strike when we're still 3 weeks or so out to expiry, the position may well have moved into profit from vega.

no offence, but i hope it doesn't work out though... as i'm moderately bearish on the banks. i was long a 34-33 sep put spread on NAB myself. i actually bought the 34 puts first, as the IV was just 11 at the time, then spread it off and sold the 33 puts later to get my premium back. when the stock was at 33 yest, i sold the 34 puts and bought the oct 33 puts to transform it into a calendar, as i wanted to scoop up the quick decay on the short 33 sep puts (during yest session when the stock was trading at 33, the 33 sep puts were hovering around 15c/16.5c), but also guard against potentially taking a big hit on the 34 puts, which were essentially 100 delta puts, in case there was a bounce today (it seems we're back in yo-yo mode, one day up, next day down, and we fell heavily yest...). obviously being bearish i also didn't want to be just short puts, so i felt morphing the position was the right move to make.

hopefully those sep 33 puts should expire worthless (yes, i know they closed at 33.11, but after getting assigned on RIO 63 puts last month when they closed at 63.06 on expiry - i'm not considering it a fait accompli just yet!), if it does, i'm probably going to look to spread it off in the coming days. with IV not as low as it was a month ago, i'm not too keen on letting straight long option positions run all the way to expiry. i'd be willing to give it a few days, as the decay is not so bad at this stage, but if another one of those 70 points down days crop up, i'm likely to sell some lower strike oct puts against it and recoup my premium. especially since another day like that may well elevate the IV even further and steepen the delta skew.


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