CM[/QUOTE] Hello, Thank you for your response. Why should a person first learn futures? I thought they were more exotic and had to do with advanced topics like international currency and commodities. I thought I was starting simple with options on stocks.
Hello, Thank you for your response. Why should a person first learn futures? I thought they were more exotic and had to do with advanced topics like international currency and commodities. I thought I was starting simple with options on stocks.[/QUOTE] There are hundreds of futures: equities, bonds, commo, forex. With futures, you "only" need the correct side, size and stop loss. With options, you also need excellent timing and choose good strikes. Quite more difficult. Without leverage, you should survive longer with futures. CM
No. The greatest amount of time premium is ATM so 2 ATMs will cost more extrinsic. Also no on the 'decent move'. Consider an ATM equidistant Butterfly (XYZ = $100 and $98/100/102 call butterfly). The net delta won't be far from zero and outside of the wings, the 2 long options offset the two shorts so there is no difference in payout. It's between the wings where the payout varies.
Yes you are correct, I misspoke. If like OP said, buy 1 ATM and 1 OTM, then returns are bette than if I buy 2 ATM in a significant up move and losses would be less in a significant down move?
And I misspoke as well. The OP asked about buy 1 ATM and buy 1 OTM versus buy 2 ATM and in my last reply I used an ATM butterfly as an example (using 2 ATM versus 1 ITM and one OTM). My bad. Let's make this really simple. What does (A) buy 1 ATM and buy 1 OTM versus (B) buy 2 ATM have in common? Each psoition has an ATM leg so let's remove that from the equation. So the comparison is, buy 1 OTM versus buy 1 ATM and the respective performance of each of those is obvious.
Don't feel bad. For the past hour, I have been getting educated in a PM convo on how a structured index product with a 10% cap and 10% of downside protection is synthetically equal to a bearish put spread paired with a covered call and how an arb may be possible. I should have caught the synthetic equivalence but I'm not grasping the arb yet since my learning curve is a little bent. The point? Ask questions and if someone can explain, it's bonus points. And no matter how foolish the question, you still get to walk around in your underwear at home (please, no JPG uploads!!!).