Analyzing an Index Option Write

[jackson8]

hi all
have been selling eto's thru commsec and am wondering if someone could point me in the direction of forums that may help me understand trading XJO S&P/ASX 200 index
are there disadvantages trading this index as opposed to others

regards
gary

 

[wayneL]

hi all
have been selling eto's thru commsec and am wondering if someone could point me in the direction of forums that may help me understand trading XJO S&P/ASX 200 index
are there disadvantages trading this index as opposed to others

regards
gary

Other forums? WTF?

The finest option minds in the known universe are right here on ASF!

 

[jackson8]

Other forums? WTF?

The finest option minds in the known universe are right here on ASF!

sorry i actually meant threads not forums
am an avid reader of aussie stock forums and have never bothered with any other of the sites that may be available
my apologies wayne

 

[Grinder]

gary, no comment on advs & dis advs as XJO the only index with liquidity, so it's the only one to trade in Oz. If you wanna know the basic stuff, asx website will give ya all that.

 

[mazzatelli1000]

sorry i actually meant threads not forums
am an avid reader of aussie stock forums and have never bothered with any other of the sites that may be available
my apologies wayne

LOL@ intimidation tactics from Wayne

 

[wayneL]

sorry i actually meant threads not forums
am an avid reader of aussie stock forums and have never bothered with any other of the sites that may be available
my apologies wayne

Just yanking your chain a bit there Gary, no need to apologize.

You could do a search, pull up the advanced search screen and type in XJO options or something. Otherwise they would basically work just like US index options... 'cept they might be European expiry.

Someone here will have the oil on them

 

[cutz]

Hi Gary,


I've been trading XJO options for a small while now, i haven't had any major issues. But saying that i can't really offer much of an opinion as its the only index i trade.
I guess from my perspective the only disadvantage is i can't trade them via IB, but they advise me that they will be avail. soon.

 

[cutz]

Gary,

Check this out http://www.asx.com.au/products/options/index_options.htm

 

[wayneL]

Update:

Premium has collapsed over the weekend as is often the case with the expiry of the previous series. (All my other January writes have done the same)

I got $60 per contract on Friday... with a little help from market direction, they are now worth $19 or $20 per contract. A long way to go yet, but always encouraging when a trade starts going the right way early, rather than having to start defending staright of the bat.


**keeping an eye over my shoulder for the appearance of Mr Murphy.

 

[Grinder]

sounds like your've got a good lead on him wayne, hope you out run him buddy.

 

[jackson8]

Gary,

Check this out http://www.asx.com.au/products/options/index_options.htm

couple of points i may try to get cleared up if i can

1) the difference in strikes is 100 points at $10 per point which makes total of $1000 (intrinsic only) between strikes.

ex. if i sold a 4000 call and the index finished 4100 on exp would only be up for $1000 less premium received correct ?

2) if premium quoted for 4000 call is 0.090 = 0.090 x 1000 = total of $90 received (being for 1 contract) loss on above sold call would be $910 less epenses .
so does the premium of 0.090 represent 9 points of the index or put another way give me cover up to 4009 points

thanks for your help would be also be interested to know if there are any gotchas to look out for trading the xjo s&p/asx200
gary

 

[cutz]

Hi Gary,


Yep you’re correct, $1000 value between the strikes assuming the difference between strikes is 100 points.
Iress shows the XJO Jan 4000 Call last sale at 9 points therefore 9 by 10 (multiplier is $10 per point) is a last sale price of $90 per contract.

2) if premium quoted for 4000 call is 0.090 = 0.090 x 1000 = total of $90 received

The way you worked out your premium is correct as that’s how the commsec website quotes its prices, it also how the old protrader used to quote and it had my confused at first because it didn’t tally up with the XJO option facts sheet. So a quote of 0.090 on the comsec site equals 9 points, then times that by multiplier ($10) and you get a premium of $90.

(same as 0.09 by 1000)

Hope that helps.

 

[jackson8]

Hi Gary,
Yep you’re correct, $1000 value between the strikes assuming the difference between strikes is 100 points.
Iress shows the XJO Jan 4000 Call last sale at 9 points therefore 9 by 10 (multiplier is $10 per point) is a last sale price of $90 per contract.

The way you worked out your premium is correct as that’s how the commsec website quotes its prices, it also how the old protrader used to quote and it had my confused at first because it didn’t tally up with the XJO option facts sheet. So a quote of 0.090 on the comsec site equals 9 points, then times that by multiplier ($10) and you get a premium of $90.
(same as 0.09 by 1000)
Hope that helps.

thanks for that cutz
thats the problem i was having trying to correlate asx information against the comsec platform.

 

[mazzatelli1000]

In the last 20 days, the index has risen 12% from a major low.

Since 1990 the index has only ever exceeded a 12% move up in 20 trading days rise on 5 occasions. On each occasion it has been from a major low, never from a high or intermediate move.

Since 1980 the index has only ever exceeded a 12% move up in 20 days, anytime ending in January, once. That was in 1988 after the crash of Oct 1987.

Hey Wayne,

Just out of curiousity is there any specific statistical software you use to reach the above conclusion or is this all done in good old excel

Reason I ask, is I am trying (HARD) to create a database infrastructure with statsitcial analysis, options modeliing, and data mining tools on stocks/indices/commodities.

I am trying to incorporate things like for example - there is a chart of IV and there is a huge upward spike in IV on the 26/10/2008. One can just click on the spike and "drill down" into news etc for that particular date, which is stored in our database.

 

[wayneL]

Just straight out donkey work with excel or amibroker if I can get it to do it.

 

[mazzatelli1000]

Just straight out donkey work with excel or amibroker if I can get it to do it.

Hahaha
The "donkey work" is much quicker than what im trying to put together
But I will share the stuff once ready

Just this VBA amd SQL is giving some headaches --- time to call some IT mates

 

[wayneL]

No worries Mazza, will look forward to that.

FWIW a look at the Feb SP500 strike... I might be closing the Jan write early and taking a 90% profit (Market Gods willing :bowdown

There are 40 trading days until February expiry.

Since 1980:

• The average move is +2.4%
• The maximum up move in 40 trading days is +19%
• The maximum down move in 40 trading days is -30%
• The maximum up move in 40 trading days ending on the Feb strike is +16%
• The maximum down move in 40 trading ending on the Feb strike days is -8.3%
• One standard deviation based on 30 day historical volatility is +/-25%
• I have one more stat to add based on IV but will add that later.

NB Historical volatility is starting to trend down with 10 day HV about half the 30 day value.

 

[wayneL]

Update.

The calls are now almost worthless.

I've not had to do any defending and with one week to go to expiry and 12 strikes in hand, I wouldn't do any defending even with a strong upwards push from here. I just don't believe > 120 SP points up has any probability of occurring.

Festive dinner with friends and family booked.

 

[theasxgorilla]

Festive dinner with friends and family booked.

Well bloody done Wayne...remember to give Murphy a parting single finger salute .

Just a quick qn on this strategy...if we were in a more volatile market, like what we saw from Sept to Oct, is it best to put this strategy on ice?

 

[wayneL]

Well bloody done Wayne...remember to give Murphy a parting single finger salute .

LOL

I'm tempted, but afraid Mr Murphy might just hold a grudge.

Just a quick qn on this strategy...if we were in a more volatile market, like what we saw from Sept to Oct, is it best to put this strategy on ice?

To be honest, during that time I stayed right the #### away from writing options unless part of a mixed spread with limited risk. But after that big fall premiums were so high you could write so ridiculously far out of the money that it was worth doing so. IIRC i posted a couple... GS @ $35, TGT @ $20 etc. Though they weren't naked writes like this.

Short answer - yes. But don't be too shy, so long as the stats add up and reward > probability of loss then it's a reasonable punt. On the other hand, professional cowards survive and profit long term, gunslingers eventually get taken out by Jesse James. Caution rules, what's the biggest risk?