Expiration Week Strategies

Discussion in 'Options' started by Brothertruffle8, Oct 15, 2006.

  1. Can anyone tell me some strategies to use next week?
    thanks,
    BT880
     
  2. nkhoi

    nkhoi Moderator

    stay away, danger, danger!!!
     
  3. Danger Will Robinson!! Danger!.............Be biased towards selling out-of-the-money calls, NOT PUTS.
     
  4. Sell the ES Oct 1360 synthetic straddle for a whopping 5.00 > spot. whoopee. Horrible premo, but my guess would be a trade to 1360 by week's end. Better, buy the Oct/Nov ES 1360 time spread at < 9.00
     
  5. Why ? You have the preverbial crystal ball or something ?
    Why not sell both out of the money calls and puts for instance ?
     
  6. Sorry to fess my ignorance here...but what is the difference between a SYNTHETIC straddle and a REAL straddle ?
    Can you detail the positions for each of these strats ?
     
  7. Nothing, but you may receive a better treatment on the otm puts than the itm call. I prefer the liquid AH market the futs provide.
     

  8. Short Oct ES 1360 synth straddle:
    -- Sell one ES Dec future
    -- Sell two ES Oct 1360 puts

    Long Oct/Nov ES 1360 time spread:
    -- Sell one ES Oct 1360 put
    -- Buy one ES Nov 1360 put

    Straddle benefits from "sticky delta" gains to neutrality. Time spread loses from aforementioned, but gains from neutrality, and strip vol gains should exceed loss from sticky deltas.

    Sticky delta refers to atm strike vol dependence -- otm vols converge to atm vols as spot = [otm]strike. The mean follows spot.
     
  9. ozzie123

    ozzie123

    Thanks riskarb! You gave me the big picture ;)