This whole discussion would be easy if the 'insurance' did not cost as much. Some ideas to buy insurance for less are: Buy long dated puts and sell before they become front month to voice high theta exposure Pay for the put by selling a corresponding OTM call Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put Set up the sling shot trade in 'coulda, woulda, shoulda.
What does it mean when they say "closing prices will be determined by referencing their respective market conditions?" Does this mean that the last price on globex will be the settlement price for the Russell? That could be a nasty few minutes given how thin the trading is....
I'm talking about a once in twenty years event. Think about what would have happened on Sept 11th if all the attacks occured at lunch and at Washington. I do worry excessively, but calamities do occur as well. P.S. Doesn't mean we have 10 or 15 years until something really bad happens. Terrorist or other. Regards, Stephen Szpak
I sort of understand these two: Pay for the put by selling a corresponding OTM call Set up 1x2 or 2x3 put ratio backspreads to pay for extra long put http://www.asx.com.au/investor/options/how/library/StrategyofWeek280303_AM4.htm Does the top one have a name? Both can involve early exercise (OEX, let's say) correct? Stephen Szpak
Financing a put with a call when the strikes are different is essentially a synthetic underlying with a smaller delta. Early assignment would be the risk on any american style, yes.
Thanks. So what is the savings, if any? To keep costs down, one would have to assume a, let's say,a 40 point drop in the E-mini S&P 500 futures BEFORE one could exit one's long futures position, (were still talking about day trading here). I say "to keep costs down" because the puts would be very cheap to buy. For simplicity, for now, perhaps comments could be made regarding the options on the E-mini S&P 500 futures. (Sorry to mention the OEX, its just more familiar.) One has to consider the different option strategies and commisions, and that they would have to be implemented repeatedly if the market moves up over a number of days (or hours). This *will* be more complicated than just buying a deeply out-of-the-money put every so often. Stephen Szpak