SPI 200 and Futures Options

[skc]

Are you sure you're a year 8 option trader and not having a lend ??

Rule of thumb number one, option delta ATM is ~ 0.5, it's been mentioned several times but you keep banging on about selling 15 lots of futures to get flat.

Are you familiar with the phrase "picking up pennies in front of steam rollers"?

Don't get me wrong I don't have a problem with the premise of the trade, it's the hedging strategy and margin implications that we all think will blow you up one day.

Also don't get us wrong, I don't anyone gives a rats about you and your capital, but in a discussion on a public forum, there are lurkers watching and listening. The discussion and criticism is for the benefit of all.

Before this thread deteriorated (albeit from a fairly low base) there were somethings I was hoping to learn as a complete options noob. I am trying to get my head around the expiry scenarios, assuming fully hedged at the strike price...

A. Index at 200pts below strike. Put gets exercised at 200pt loss, hedge makes 200pt gain. Premium collected and brokerage / spread incurred.

B. Index at 200pts above strike, with hedge closed out at strike. Put expires not exercised, hedge closed out at breakeven. Premium collected and brokerage / spread / slippage costs incurred.

So aside from the margin requirements during the hold period (which might be managed by say, having a home equity LOC at hand - might not be wise, but feasible), and the fact that index may move around the strike many times to increase the cost of brokerage/spread/slippage of the hedge, are there other possible wipe-out type risks?

intresting thread ...... heres a summary so far.

1. Brokers post there clients statements on websites.

2. family member works for JPM

3. have friends on the sfe floor

4. makes a sheetload of cash.

5. WayneL has lots of posts and educated.

All of the above have been posted during this discussion to validate that the poster is correct and has the relevant trading experience and contacts to educate us mere mortals into being Guru options traders also .

Please continue.

6. Blame macbook for unable to produce broker statements.

7. When losing debate, sign up as new members to support your own arguments or change topics.

 

[MRC & Co]

In 5mins the Spi can drop 30 ticks.
20 lots X 25 X 30 =15K

Ouch!!!!

lol, with the well known European bank run bot in the SPI, that can be a regular day, broker or stop or not!

 

[Trembling Hand]

Back on topic, hahahahahahahahahahah!!!!

Why wouldn't you just use XJO options? As long as you are not trading 1 or 3 lot SPI to hedge surely the more liquid XJO options would be where you want to be. Or has it something to do with the SPI price? divs? something else?

 

[wayneL]

Before this thread deteriorated (albeit from a fairly low base) there were somethings I was hoping to learn as a complete options noob. I am trying to get my head around the expiry scenarios, assuming fully hedged at the strike price...

A. Index at 200pts below strike. Put gets exercised at 200pt loss, hedge makes 200pt gain. Premium collected and brokerage / spread incurred.

B. Index at 200pts above strike, with hedge closed out at strike. Put expires not exercised, hedge closed out at breakeven. Premium collected and brokerage / spread / slippage costs incurred.

So aside from the margin requirements during the hold period (which might be managed by say, having a home equity LOC at hand - might not be wise, but feasible), and the fact that index may move around the strike many times to increase the cost of brokerage/spread/slippage of the hedge, are there other possible wipe-out type risks?

1/ The above scenario presumes neat moves through the strike and seamless trades at the same (just the contest risk). Nice work if you can get it. In reality it may not happen that way.

2/ Look at the face value of the trade ( 20 x 25 x index value = ~ $2,000,000) and think of a black swan scenario

3/ Margin - can multiply itself in a volatile move to the strike. Just how much money do you want to lay down for a lousy few grand? How much money have you got? What if you can't meet the margin call?

A good rule of thumb when writing WTFOTM is allocating at least 300% of SPAN as capital to finance that trade. However that is with the presumption of hedging in a stepwise fashion, before the strike is hit. Waiting for the strike to be hit before doing anything may require 500% of SPAN or more. Even that may not be enough for a volatile adverse move right off the bat.

There is a very good thread on another forum where this very same scenario happened.

This clown wrote WTFOTM FTSE puts to prove how well it works. This was in 2008. You can fill in the blanks but he couldn't meet the margin call and had to lock in a colossal loss.

 

[wayneL]

Back on topic, hahahahahahahahahahah!!!!

Why wouldn't you just use XJO options? As long as you are not trading 1 or 3 lot SPI to hedge surely the more liquid XJO options would be where you want to be. Or has it something to do with the SPI price? divs? something else?

SPAN margining I guess.

It's why I usually use ES over SPX

 

[Sell 20 lots]

Before this thread deteriorated (albeit from a fairly low base) there were somethings I was hoping to learn as a complete options noob. I am trying to get my head around the expiry scenarios, assuming fully hedged at the strike price...

A. Index at 200pts below strike. Put gets exercised at 200pt loss, hedge makes 200pt gain. Premium collected and brokerage / spread incurred.

B. Index at 200pts above strike, with hedge closed out at strike. Put expires not exercised, hedge closed out at breakeven. Premium collected and brokerage / spread / slippage costs incurred.

So aside from the margin requirements during the hold period (which might be managed by say, having a home equity LOC at hand - might not be wise, but feasible), and the fact that index may move around the strike many times to increase the cost of brokerage/spread/slippage of the hedge, are there other possible wipe-out type risks?



6. Blame macbook for unable to produce broker statements.

7. When losing debate, sign up as new members to support your own arguments or change topics.

Before we start I'm not Pit or Art.
I do know the person and have spoken.
Has asked me relay that due to being banned from this site
can no longer post reply.
Has told me I will probably get banned by WayneL but has asked me to
let the members know the reason for the lack of response.

If you dont here from me again I have probably been banned too.

O&O.....

 

[Sell 20 lots]

Has also asked me to post this from the blog he has referred to previously.


Last week we had 5 profitable trading days.

Our success was due to some good anaylsis and patience.Waiting for the market to come to us and not chasing the price is KEY to successful trading.The market needs to be traded from the outside not the inside.There is a big difference between to two.


As we suspected the 4460 level held firm throughout the day.We will continue to monitor this level as is important resistance and needs to be watched.While we remain below this level we remain bearish on the Spi.The action on Friday was slow as we reported due to it being Friday and a long weekend in the US.

We managed a good trade selling in to the the move toward 4460 and covered 10 points below.

Today we will sell anything around this level(4460) if a rally eventuates.The first level of support comes in around 4400 and then if that is broken the 4360-70 level acts as support.We will monitor volumes around these levels to look for entry points.4350 is an important level and if the sellers take control we will look to add some longs around here.

For disclosure purposes I do have an affiliation to this blog !!!!

 

[nunthewiser]

unreal

 

[Kryzz]

"Bob Pisani", "Pit Trader", "Art Cashin", "Sell 20 Lots"...maybe he's going for a record no. of accounts for one person?

 

[acouch]

"Bob Pisani", "Pit Trader", "Art Cashin", "Sell 20 Lots"...maybe he's going for a record no. of accounts for one person?

he seems to have a lot of time on his hands..
ac

 

[skc]

1/ The above scenario presumes neat moves through the strike and seamless trades at the same (just the contest risk). Nice work if you can get it. In reality it may not happen that way.

2/ Look at the face value of the trade ( 20 x 25 x index value = ~ $2,000,000) and think of a black swan scenario

3/ Margin - can multiply itself in a volatile move to the strike. Just how much money do you want to lay down for a lousy few grand? How much money have you got? What if you can't meet the margin call?

A good rule of thumb when writing WTFOTM is allocating at least 300% of SPAN as capital to finance that trade. However that is with the presumption of hedging in a stepwise fashion, before the strike is hit. Waiting for the strike to be hit before doing anything may require 500% of SPAN or more. Even that may not be enough for a volatile adverse move right off the bat.

There is a very good thread on another forum where this very same scenario happened.

This clown wrote WTFOTM FTSE puts to prove how well it works. This was in 2008. You can fill in the blanks but he couldn't meet the margin call and had to lock in a colossal loss.

Thanks. No idea how SPAN is calculated, however.

 

[Hit the Bid]

Has also asked me to post this from the blog he has referred to previously.


Last week we had 5 profitable trading days.

Our success was due to some good anaylsis and patience.Waiting for the market to come to us and not chasing the price is KEY to successful trading.The market needs to be traded from the outside not the inside.There is a big difference between to two.


As we suspected the 4460 level held firm throughout the day.We will continue to monitor this level as is important resistance and needs to be watched.While we remain below this level we remain bearish on the Spi.The action on Friday was slow as we reported due to it being Friday and a long weekend in the US.

We managed a good trade selling in to the the move toward 4460 and covered 10 points below.

Today we will sell anything around this level(4460) if a rally eventuates.The first level of support comes in around 4400 and then if that is broken the 4360-70 level acts as support.We will monitor volumes around these levels to look for entry points.4350 is an important level and if the sellers take control we will look to add some longs around here.

For disclosure purposes I do have an affiliation to this blog !!!!

If this Blog is for real that is copied in here surely it needs attention.
If it had 5 good days then thats something to be taken seriously.
If the commentary for today was "sell anything around 4460" was posted before market open then it was GOOD advice for today.

Apart from all the heated debate if one positive aspect is a blog that can
have some accurate calls on the Spi then all this was worth it.

 

[nunthewiser]

ROFLMAO!.

i repeat...............unreal!

 

[Kryzz]

"Bob Pisani", "Pit Trader", "Art Cashin", "Sell 20 Lots"...maybe he's going for a record no. of accounts for one person?

add: Hit the Bid

this dude's a machine!!

 

[nunthewiser]

instead of spamming this joint with your pathetic attempt at getting traffic to your blog .. why not post your calls here in real time instead darl ?

word of warning tho . hindsight calls will be treated with the ridicule they deserve.

 

[Hit the Bid]

instead of spamming this joint with your pathetic attempt at getting traffic to your blog .. why not post your calls here in real time instead darl ?

word of warning tho . hindsight calls will be treated with the ridicule they deserve.

I'll ignore the insults as I'm a newbie.

Does anyone know when the call for today was made ?
Without jumping all over me,was it before the market opened ?

 

[nunthewiser]

Hey!..... Even better!

Why not pay for some advertising space here instead?

 

[nunthewiser]

I'll ignore the insults as I'm a newbie.

Your multi alias spam attack is an insult to my intelligence.

Grow up.

now that IS an insult

 

[nulla nulla]

Before we start I'm not Pit or Art.
I do know the person and have spoken.
Has asked me relay that due to being banned from this site
can no longer post reply.
Has told me I will probably get banned by WayneL but has asked me to
let the members know the reason for the lack of response.

If you dont here from me again I have probably been banned too.

O&O.....

Reminds me of the Pauline Hanson Video "If you are watching this, it means I am dead." Substitute "banned" for "dead".