Options Mentoring

[jackson8]

hi all
interested in feedback of similiar experiences

have had an open position on a way otm sold put on sto which i sold day after price drop from equity raising

with the sp up this morning by about 30c i placed a buy to close order just below mms offer

it sat there all day and sto sp slowly dropped towards its previous close , so thought well that wont be filled

on checking the order after close i find it was filled just before closing time, even though sp had dropped 25c from when i had originally placed order so theorectically my bid should not have been filled as value of oppie would have been more as sp dropped

could it be that some of the spreads through out the day are not true value and then they are obliged to fill orders at end of day based on true value

hope this makes sense
gary

 

[cutz]

Hi Gary,

I can't really shed any light on your question at the moment but MM's aren’t obliged to fill retails order towards the end of the day unless of course you hit the bid/ask, or a close enough price they deem reasonable.

All I can say is I have had orders filled in stages so I never assume a market maker is always taking the other side. Recently I had a MQG put sell order sitting in the system for half the day only to be partially filled after the close, again I assume by a retail trader like myself who was more willing to trade at that price.

Yeah dunno, maybe someone else can fill us in.

 

[Grinder]

hi all
interested in feedback of similiar experiences

have had an open position on a way otm sold put on sto which i sold day after price drop from equity raising

with the sp up this morning by about 30c i placed a buy to close order just below mms offer

it sat there all day and sto sp slowly dropped towards its previous close , so thought well that wont be filled

on checking the order after close i find it was filled just before closing time, even though sp had dropped 25c from when i had originally placed order so theorectically my bid should not have been filled as value of oppie would have been more as sp dropped

could it be that some of the spreads through out the day are not true value and then they are obliged to fill orders at end of day based on true value

hope this makes sense
gary

Don't know about that, but I do know they work in mysterious ways (is a nice way to put it). I've also had the odd order get filled after close in a simmilar situation to what you described, thought it was alittle peculiar but cest la vie.

Cutz mentioned about orders being filled in stages, this makes sense as they would be looking to stay hedged at all times, could be that they just needed to take it then to balance their books.

or

my conspiracy theory, they would'nt take your trade at your price earlier in the day as you priced it too fair, so instead they wait till you cave a bit on the price (knowing your the only fish in the pond) By EOD they take the trade knowing you won't move on it. End result they still cut a profit through the transaction, but not as much as they would have hoped. Im probably way off the mark though.

 

[warezwana]

Sore eyes from reading this ENTIRE thread but great work to ALL the experienced members that spent soooooo much of their time talking options... I found the 1st 11pages or so very everwhelming but good to see such effort from you guys

Tech, Wayne, RichKid, Magdoran, Sails sorry if I missed anyone...

Off to ask something on a new thread... Thanks guys for your forum input.

As for the 'mentoring' I cant help but wonder if there is any people out there wiling to let newbies look over their shoulder as they trade

 

[wayneL]

Pinny Friday

I do not know how applicable it is to Oz market, maybe some of the resident MM's can shed light.

But for the US there is research and empirical evidence that there is excess drift generated by delta hedging and rollver arb activities that pushes a stock towards a strike price on expiration most notably on optionable stocks. Hence your observation of pinning.

The effect is most pronounced on expiration day, and models for stock pinning are created for those days, as there is discrepancies with the Black-Scholes Model.

Open Interest is not necessarily causation for Stock Pinning due to if I remember of the top of my head:
1) As above pinning mostly occurs on expiration day nearing the end of the session
2) With OI, it is not clear whether MM's are short or long gamma

BTW Option MM by Baird is a great text, should be in every option traders library IMHO.

I've just been catching up on a few of these threads and this caught my eye.

Adam Warner, an ex MM at AMEX who blogs at The Daily Option Report and elsewhere, writes quite often on the pinning phenomena. It's a good blog to keep an eye on.

http://adamsoptions.blogspot.com/search?q=pinning

He's also written a book that's due to be released soon:

I get the impression that there is a fair bit about it in there. I'll be getting it when released.

 

[cutz]

Hi Guys,

Can anybody recommend an options contract similar to our XJO, (index cash settled ) or SPY series (underlying S&P 500 ETF) that's traded in Europe.

Evening hours sound attractive (as opposed to the US 11.30 pm open) and XJO has its moments especially OTM.

Hope i'm not highjacking your thread Wayne, couldn't find one more appropriate.


Thanks in advance.

 

[wayneL]

Hi Guys,

Can anybody recommend an options contract similar to our XJO, (index cash settled ) or SPY series (underlying S&P 500 ETF) that's traded in Europe.

Evening hours sound attractive (as opposed to the US 11.30 pm open) and XJO has its moments especially OTM.

Hope i'm not highjacking your thread Wayne, couldn't find one more appropriate.


Thanks in advance.

Cutz,

Off the top of my head, there are options on FTSE futures. Ticker symbol Z if you're on IB.

I'll have a dig around and see what else there is.

 

[wayneL]

Cutz,

Off the top of my head, there are options on FTSE futures. Ticker symbol Z if you're on IB.

I'll have a dig around and see what else there is.

Cutz,

There is a FTSE 100 ETF... IYR I think it is.

Then there are DAX futures options, big contract though if that's a problem.

ESTX50 is another smaller European index future with options too.

FWIW

 

[cutz]

Thanks for the replies Wayne,

Just got to get my head around all the different exchanges and indices, would you consider the FTSE to be the european benchmark ?

I want to pick an index that i can familiarize myself with, i've heard of a few others (over in europe) but haven't payed much attention till now.


EDIT>> Sorry guys, i think i should have stuck my query in the international index trading thread but my query relates more to index option trading.

 

[wayneL]

Thanks for the replies Wayne,

Just got to get my head around all the different exchanges and indices, would you consider the FTSE to be the european benchmark ?

I want to pick an index that i can familiarize myself with, i've heard of a few others (over in europe) but haven't payed much attention till now.

Hmmmm tough question.

ESTX50, though a smaller contract @ €10 per point, represents the 50 largest companies in the whole of Europe, so is probably the most representative.

FTSE is £10 per point and represents only companies listed on the LSE. It's all in English though and has BHP in it so most akin to the XJO.

DAX is German and much bigger.

I do US indices mainly but fiddle a bit on the FTSE... I guess the one with the best liquidity is best, but don't know which one that would be at this point. I only have LIFFE subscription (FTSE).

FTSE suits my purposes.

 

[cutz]

Got it Wayne,

I'll research those you suggested this weekend, ESTX50 is looking good at this stage.

 

[cutz]

Hi guys,

I've was checking out the euro markets last night and i've come to the conclusion that ESTX50 is what i'll follow (thanks Wayne ), i also came across EXW1 which is the iShares ETF version i plan to use for adjusting purposes.

A question i have is is this practical ?, ESTX50 closed at 2469.2 up 0.24%, EXW1 closed at 25.295 up 0.14%, is the percentage difference due to the fact that the ESTX50 futures keep trading when the equities markets close so a divergence may occur.

What do you guys reckon, EXW1 for hedging adjustments to ESTX50 options positions, is this practical.

BTW tips on how this can be handled on Hoadleys will be appreciated.

 

[cutz]

OK guys,

I've been playing with Hoadley's and i've decided to ditch the idea of using stock to obtain 0.5 delta adjustments to index option positions ( in my trials an adjustment of less that what a futures contract will obtain )

I guess this goes back to what you were talking about mazza when you were referring to delta-hedging on an ad hoc/discrete basis, no point trying to get point 5, adjust when it's out of whack by 1 ( for example) which equals 1 futures contract.

Dunno what i was thinking.

Futures are the go.

 

[wayneL]

OK guys,

I've been playing with Hoadley's and i've decided to ditch the idea of using stock to obtain 0.5 delta adjustments to index option positions ( in my trials an adjustment of less that what a futures contract will obtain )

I guess this goes back to what you were talking about mazza when you were referring to delta-hedging on an ad hoc/discrete basis, no point trying to get point 5, adjust when it's out of whack by 1 ( for example) which equals 1 futures contract.

Dunno what i was thinking.

Futures are the go.

You can delta hedge with verticals if you want fractional deltas. I find this far more useful as far as incrementally morphing positions as well.

simple example

1000/1100 short strangle can be hedged and gradually morphed to say a 1100 straddle and then to a 1100/1200 straddle, using 1000/1100 verticals then 1100/1200 verticals.

 

[freebird54]

this happens to me all the time.........................

my conspiracy theory, they would'nt take your trade at your price earlier in the day as you priced it too fair, so instead they wait till you cave a bit on the price (knowing your the only fish in the pond) By EOD they take the trade knowing you won't move on it. End result they still cut a profit through the transaction, but not as much as they would have hoped. Im probably way off the mark though.[/QUOTE]

 

[Grinder]

freebird54, eventually it will happen enough times to piss you off for good.

 

[moXJO]

Is djx for djia

 

[cutz]

What do you guys reckon about cfd's to hedge/adjust XJO options.

SFE traded XJO(IQV6) looks fairly liquid, they appear to be handier than SPI contracts when used in conjunction with options.

Any thoughts ?

 

[wayneL]

Is djx for djia

Mo, yes

SPX, and even NDX & RUT are far more liquid though.

 

[wayneL]

What do you guys reckon about cfd's to hedge/adjust XJO options.

SFE traded XJO(IQV6) looks fairly liquid, they appear to be handier than SPI contracts when used in conjunction with options.

Any thoughts ?

The only issue I can think of cutz is how margin will be treated. Whether that might be a problem or not, I don't know.