Just a couple of questions. I'm motoring through those options books you recommend Wayne, some great stuff. Read the covered call section in the Mcmillan book twice now, and am a third through the Natenburg book. Should be doing study, but am enjoying them too much.
Just on delta neutral strategies... what happens if you get an early excercise whilst using this strategy? And is this still profitable? If the market thinks there are a lot of people using this, will it start hunting certain levels? A lot of people have claimed they were ruined because agents knew positions and were targeting them, didn't they?
There are different ways of looking at this, all via synthetic relationships. Realistically there are two instances where you are in danger of early assignment on short . ITM puts and calls where there it is about to go ex-dividend and there is a financial benefit for the call owner.
With euro style options (index) this is not a problem.
Let's say you are constructing an iron condor. You will have a short ITM put which could get exercised early. The answer is to construct an all call condor. People like to do irons for the credit, but at the end of the day there is not much difference, unless there is an issue with the spread. They are synthetically equal.
On the call issue, just watch for the ex div date is the obvious thing.
If you do happen to be assigned. It's a matter of re-evaluating where your at, and adjusting to suit. Lets say your assigned the short put in an iron condor. Now you have a leg of long stock. You can keep the stock and sell a call against it, and you have a synthetic short put again.
Will the market hunt levels? I don't know, but you should have a defence strategy in place.
On stocks, I don't go straight fro the condor. I'll do a credit spread and go delta neutral and start hedging with stock, roll, flip, or whatever if it goes pear shaped.
And is this strategy even possible on Oz stocks? Considering in a lot cases, you would need several 100k worth for a lot of stocks.
Is there any way I can write puts, with the intention of being comfortable with being assigned, for a $50 dollar stock in Oz, without needing 50k? Only say, wanting 5k of it?
Not really. Not without the risk of the 50k position that I can think of.
Also, is there any easy reference to the full list of optionable stocks on the ASX? And which ones only settle every three months, and each month.
What is the full cost in brokerage on IB, from writing and purchase, to excercise/ assignment?
I don't know these two as will be different to US. Sails will know.
Does the fact that ASX options are in lots of 1000, rather than 100 lead to the illiquidity problems in Oz options? And do you think they would be better off changing that?
I reckon so. But don't have any evidence to prove it. But a lack of MM competition has a lot to do with it as well.
Sorry for the questions. Just very enthusiastic atm. Cheers.