Shorting individual stocks

[HelloU]

(top of head)

public inquiry done last year (or maybe 2017) regarding nakeds coming back ...... dunno what happened

 

[Zaxon]

public inquiry done last year (or maybe 2017) regarding nakeds coming back ...... dunno what happened

There's a public enquiry into you being naked? I shudder to think...

 

[Zaxon]

Not wishing to start more threads since there are plenty already on ASF, but want to discuss Options in a bit more detail on this thread, hope it's OK with you Zaxon.

Go right ahead . I see anything that's about profiting on the downside as being totally relevant to this thread.

As I mentioned before it's better to prepare when things are stable rather than to work out strategies when the market is plummeting like during GFC.

Is there a risk of paying for insurance that most likely won't "pay out"? For instance, in a raging bull market, would you avoid downside protection? But in a neutral (or obviously down) market, you might set some up?

So what brokers offer the best Options brokerage in Australia?

CMC Markets: $33 or 0.33% (so worse than Bell)
SelfWealth: appear not to allow them

 

[HelloU]

Get ready, if they make a return then you really do not want to be caught with your pants up.

 

[HelloU]

Get ready, if they make a return then you really do not want to be caught with your pants up.

which is a nicer comment than what i really wanted to say ........ if you are shuddering then i know you are thinking about it ....purrrrrrrr.

 

[aus_trader]

CMC Markets: $33 or 0.33% (so worse than Bell)
SelfWealth: appear not to allow them

Ok thanks for adding to the list, hope others who use/know options can contribute to the list.

I know SelfWealth (SWF) is fairly new and they claim to offer the lowest online brokerage for share trades at $9.50. It'll be interesting if they can offer a lowest brokerage on Options in the future.

 

[aus_trader]

While we are at it and honing down on Australia's lowest cost Options trading house, if there are ASF members who are doing regular Options trades it would be great if you can post them here and state the reasoning for others to learn from. Doesn't matter if the result is a win or a loss, no one should judge as we are all here to learn.

 

[cutz]

So I like to explore Options in more detail for shorting strategies since they are supposed to be quite versatile compared to say warrants. Options can do complex strategies like: spreads, straddles and even Iron Condors. Don't ask me the latter ones I am still learning and don't actually employ any of them at the moment. So what brokers offer the best Options brokerage in Australia?
Just to get the ball rolling I will start the list:

Comsec: $34.95
Bell Direct: $30 or 0.3%, whichever is greater + ASX Clear transaction fee

For complex strategies you need to get set up with Interactive Brokers. The latter is simply short a strangle long a wider strangle or a Bear Call coupled with a Bull Put.

 

[cutz]

While we are at it and honing down on Australia's lowest cost Options trading house, if there are ASF members who are doing regular Options trades it would be great if you can post them here and state the reasoning for others to learn from. Doesn't matter if the result is a win or a loss, no one should judge as we are all here to learn.

My last trade was morphing a WPL backspread back into it's original Bull Put, the other half of the position is a Bear Call so originally an Iron Fly and now restored. Just taking advantage of the nice drop off in crude.

 

[Sharkman]

While we are at it and honing down on Australia's lowest cost Options trading house, if there are ASF members who are doing regular Options trades it would be great if you can post them here and state the reasoning for others to learn from. Doesn't matter if the result is a win or a loss, no one should judge as we are all here to learn.

BHP Jun 36.42-34.98 1 by 2 ratio put spread, done a few days ago when the underlying was at $37, for very small credit ($1.50/contract from memory)

strikes in BHP are a bit funny, presumably because of the special distribution earlier in the year

looking for a continuation of the Apr fall to around the $35 level, which could become resistance turned support (it got rejected there a few times last year before breaking thru early this year). 200 day EMA also hovering around that level. chance to make up to $144/contract, low breakeven at 33.54

note that for people trading thru IB (the only real choice for trading ASX options IMHO, the commissions charged by anybody else who offers them is a joke) and were forced to migrate to IB Aust recently, you cannot let short puts get assigned if you don't have the cash to fully cover it, you must close out (probably in the last hour on expiry day to extract the most decay as you can). otherwise IB will liquidate any of your holdings at random to bring your cash balance back above zero afterwards - that will not necessarily be whatever was put to you from the thing that just got assigned!

 

[aus_trader]

Thanks guys (cutz, Sharkman), looks like Interactive Brokers blows any of our local brokerage firms out of the water. Because they had different prices for US, Europe, Asia Pacific etc would any of you be able to say what you actually pay for an ASX stock options trade?

Since you guys are doing more complex strategies like spreads and Iron Flies what is the total cost of such a trade? i.e. let's say to buy a Call / sell a Put of a different strike price at the same time etc in a multi-legged trade on the same stock?

 

[cutz]

Thanks guys (cutz, Sharkman), looks like Interactive Brokers blows any of our local brokerage firms out of the water. Because they had different prices for US, Europe, Asia Pacific etc would any of you be able to say what you actually pay for an ASX stock options trade?

Since you guys are doing more complex strategies like spreads and Iron Flies what is the total cost of such a trade? i.e. let's say to buy a Call / sell a Put of a different strike price at the same time etc in a multi-legged trade on the same stock?

Agree , excellent brokerage !

Commission only 30cents a contract on equity options.

So in your case two legs using an example size of 10 / 10X30centsX2 = $6 plus GST.

Don't forget to include ASX data at 25dollars a month.

Also Sharkman is on the money, unless its part of your strategy, ( long stock after assignment ) make sure you have the cash to cover, manage your positions prior expiry.

BTW sometimes things can go wrong, many years ago I was caught out with an extended ASX outage on expiry day, unable to get out of my front positions and subsequently assigned, Comsec were extremely great the next day, a senior dealer unwound my unwanted positions and got my costs reimbursed, I got off lightly because the market swung my way.

 

[aus_trader]

Agree , excellent brokerage !

Commission only 30cents a contract on equity options.

So in your case two legs using an example size of 10 / 10X30centsX2 = $6 plus GST.

Don't forget to include ASX data at 25dollars a month.

Also Sharkman is on the money, unless its part of your strategy, ( long stock after assignment ) make sure you have the cash to cover, manage your positions prior expiry.

BTW sometimes things can go wrong, many years ago I was caught out with an extended ASX outage on expiry day, unable to get out of my front positions and subsequently assigned, Comsec were extremely great the next day, a senior dealer unwound my unwanted positions and got my costs reimbursed, I got off lightly because the market swung my way.

Yes, good point about closing the contracts before expiry, only looking to profit from the underlying stock movement rather than having the stock assigned to me.
I initially plan to use options in a down trending or bear market environment only so just wandering whether the ASX data feed has to be kept ON all the time i.e. $300 per year or can it be turned ON/OFF each month to save money when the market is trending up or flat ?

 

[cutz]

Yep, although its excellent value and has come down in price from a few years ago data can be switched on/off.

Delayed quotes are free, so is some US and several other exchanges if commission you generate is above a certain level !

 

[Sharkman]

yep 30c per contract with $2 minimum, so best bang for buck at 7+ contracts.

since IB charges by contract, not by proceeds, it pushes you towards options on dollar expensive stocks like the big banks, BHP, RIO, where you get more dollar exposure for each contract. it's not as good with dollar cheap stocks like TLS, despite its liquidity, you have to trade way too many contracts to get any decent exposure.

in my view that is something you should be doing anyway, because of tick size. for options over TLS, you could be looking at a 0.10/0.12 type spread. if you need to buy options, unless you get filled right on the mid (and you can't assume that will always happen - it won't), you will take a significant hit, as the next best you can buy at is 0.115. contrast that with a CBA or RIO where you might face a 1.00/1.20 spread, if you need to buy into that spread, very good chance you can snag it for 1.105, 1.11, or 1.115.

you don't strictly need to buy IB market data to trade options thru them. i don't. one of the advantages of having both a long term buy & hold portfolio as well as a short term options trading portfolio is that i can get live ASX options market data for free from the ripoff local broker that i have my CHESS sponsored long term portfolio with, even though i've never traded any options with them (brokerage is way too expensive).

closing out before expiry isn't a hard and fast rule. if you're ok with the resulting stock position, it's perfectly valid to just take the assignment, provided that you have the cash to cover it. i used to do that a lot when my account was still with IB LLC and i had access to margin - didn't need to fully cover with cash back then. haven't done it since the forced migration to IB Aust. there are some advantages to taking the assignment. you squeeze out every last bit of decay, you don't have to cross a potentially nasty spread to close out the option (MM can sometimes get rather stingy on expiry day, as they know people will be looking to close), and you can always just turn around and immediately sell covered calls over the stock you just got assigned.

 

[cutz]

yep 30c per contract with $2 minimum, so best bang for buck at 7+ contracts.

since IB charges by contract, not by proceeds, it pushes you towards options on dollar expensive stocks like the big banks, BHP, RIO, where you get more dollar exposure for each contract. it's not as good with dollar cheap stocks like TLS, despite its liquidity, you have to trade way too many contracts to get any decent exposure.

Yep, that's my zone, higher face value contracts including CSL which I get good fills on spreads.

A big four broker is also good if you wanna get long gamma, for example buying a bucket load of OTM bank puts or OTM index calls, single legs below 10K value, cheap and not a problem !

 

[aus_trader]

yep 30c per contract with $2 minimum, so best bang for buck at 7+ contracts.

since IB charges by contract, not by proceeds, it pushes you towards options on dollar expensive stocks like the big banks, BHP, RIO, where you get more dollar exposure for each contract. it's not as good with dollar cheap stocks like TLS, despite its liquidity, you have to trade way too many contracts to get any decent exposure.

in my view that is something you should be doing anyway, because of tick size. for options over TLS, you could be looking at a 0.10/0.12 type spread. if you need to buy options, unless you get filled right on the mid (and you can't assume that will always happen - it won't), you will take a significant hit, as the next best you can buy at is 0.115. contrast that with a CBA or RIO where you might face a 1.00/1.20 spread, if you need to buy into that spread, very good chance you can snag it for 1.105, 1.11, or 1.115.

you don't strictly need to buy IB market data to trade options thru them. i don't. one of the advantages of having both a long term buy & hold portfolio as well as a short term options trading portfolio is that i can get live ASX options market data for free from the ripoff local broker that i have my CHESS sponsored long term portfolio with, even though i've never traded any options with them (brokerage is way too expensive).

closing out before expiry isn't a hard and fast rule. if you're ok with the resulting stock position, it's perfectly valid to just take the assignment, provided that you have the cash to cover it. i used to do that a lot when my account was still with IB LLC and i had access to margin - didn't need to fully cover with cash back then. haven't done it since the forced migration to IB Aust. there are some advantages to taking the assignment. you squeeze out every last bit of decay, you don't have to cross a potentially nasty spread to close out the option (MM can sometimes get rather stingy on expiry day, as they know people will be looking to close), and you can always just turn around and immediately sell covered calls over the stock you just got assigned.

Thanks Sharkman, this is awesome information

 

[aus_trader]

A big four broker is also good if you wanna get long gamma, for example buying a bucket load of OTM bank puts or OTM index calls, single legs below 10K value, cheap and not a problem !

Sorry cutz, I got a bit lost with the quoted information you wrote. Would you care to explain it a bit further please ?

 

[Zaxon]

Sorry cutz, I got a bit lost with the quoted information you wrote. Would you care to explain it a bit further please ?

Cutz writes some excellent posts about options, but when I read, "Buy the whoosie short put with a split-whatsie, wrapped up in a straddled hows-your-father", I'm never quite sure what he means nor how to respond

 

[aus_trader]

Cutz writes some excellent posts about options, but when I read, "Buy the whoosie short put with a split-whatsie, wrapped up in a straddled hows-your-father", I'm never quite sure what he means nor how to respond

Yes I get most of his acronym and options lingo filled comments. But sometimes it goes over my head as well...