DMO , great videos and great blog Are you planning to put some real life / practical examples of you skew [same exp , diff strikes] strategy in the future ?
I just watched the "What is an Option Worth?" video. It was very nicely done. Kudos. Based on the questions that seem to pop up over and over on ET about options may I suggest another video dedicated to explaining more fundamentals of options such as the Greeks and open interest. I wish I had a dollar for every time these questions get asked on here. It would be nice to be able to just link them to a vid instead of old posts from years ago.
Yes, absolutely. I want to do a bunch of more fundamental videos first to establish a solid foundation, then I'll get into the more sophisticated stuff.
Yep, I'm currently working on greeks videos even as we speak. But I'm curious about your suggestion of a video about open interest. What is it about open interest that you find people are confused about?
OI doesn't need it's own video but touch on it in some other basics video. Just explain what it is what you would look at this for and what causes it to go up and down. You could probably just say: Open Interest (OI) is simply the number of open contracts in the market. If a single contract trade results in a new contract being created (both parties are trading to enter a position) then OI is increased by 1. If a single contract trade results in a contract being closed (both parties are trading to exit a position) then the OI is decreased by 1. If a single contract is transferred from one person to another (1 person closing a position and one person entering) then the number stays the same. You might also want to mention that you do not want to be holding too much of the OI yourself, unless you truly feel comfortable holding that position until expiration.
As simple as they sound, these are pretty good suggestions. Generally speaking, the simpler the better. At some point I'll do an ultra-simple intro to futures and options.
I had a follow up question on your vix video; around minute five you show a chart of the cash and vix future with the discrepency of 20 at its peak between the two. What would you attribute that to, in other words would you see the divergence between the two as a tradeable event. The cash was spiking higher while the future stopped rising. I guess what I am asking is if you see that divergence as tradeable, thanks.
I attribute the discrepancy to the fact that the VIX futures traders thought the VIX cash spike to 90 was a very temporary event that would not last until expiration. They were so sure that the rise to 90 was temporary, and so anxious to short it up there, that they were even willing to short it 23 points lower than the cash VIX price.