Expirationless options

Discussion in 'Options' started by IV_Trader, Dec 14, 2005.

  1. wabrew


    Shades of the 20's. Looking for a way to margin at more than 50%? - this looks like it fits.

    When does this exchange start?

    Looks like a serious challenge to 'traditional' options, especially those on low priced stocks.

    The calculator works great -- if you want to use the built in excell graphing feature, remember to turn off pop ups and to hold down Ctrl key when you click on graphs. There are actually multiple graphs for each scenario.

    Am looking forward to learning more about this new way to trade options.
  2. Wow, I thought it was a joke. Thanks for the link, IV. It's an end-around on RegT. Vega, gamma, rho in order of magnitude, with no time-smile to either. Interesting in the sense you can trade pure, isolated volatility without a concern for theta marking down vega and ramping gamma. Traders will be forced to account for rho as well.
  3. Here is a question about the XPO's . Who would sell them? What would be the reason to sell a contract? Is this not just a glorified futures contract? like riskarb said a work around Reg T?
  4. Buy(sell) calls or puts into an expected increase(decrease) in vol. These are pure volatility instruments -- you're correct; these will definitely trade for a vol-premium over the standard options.
  5. I got this info at Vegas show. That what co representative (he was European) told me :
    1. coming next summer
    2. Only PHLX will have it
    3. initially for three indices only , but later on individual stocks too
    4. No B&S formula , they wrote their own unique (I say) algorithm
    5. excellent respond so far from MM , could be a fairly liquid product

    If anyone of you have some specific questions , I can go back and ask him again
  6. Are you sure it's not a joke ?

    How the hell would you price an option that doesn't expire ? How do you account for the infinate finance ? Surely there would be an interest rate arb, one way or the other ?

    In all the years traditional options have been around, why has nobody come up with this before ? What's changed ?

    Nah, can't see it.
  7. I haven't a clue how you would account for the forward with no expiration. They would be hugely sensitive to rho, yet there is no way to calc the exposure with standard option maths.

    There is no locale for which to price the forward. It would benefit to price these with something like Heston for vol, but I don't know how you could price these convetionally -- the calls would be trading dramatically over same-strike puts. That's of you could somehow fix a locale, which you cannot.

    OK, these suck.
  8. What total BS... talking about put/call parity and nothing else:

    "In 1973, Nobel-prize-winner Robert Merton provided the means to price an XPO Put. By recognizing that at an exchange-equivalent strike price in the currency markets, a dollar-yen call (the right to "call away" yen for dollars) is equivalent to a yen-dollar put (the right to "put" dollars in another investor's portfolio in exchange for yen), we recognize that Merton's dollar-stock XPO put (the right to put stock in another investor's portfolio in exchange for dollars) was also a stock-dollar XPO call (the right to call away dollars in exchange for stock). We use this transitive theory to price XPO Calls either directly or through calculation of the XPO Put and transformation to calculate the price of the XPO Call. Dr. William Margrabe, former professor at The Wharton School at The University of Pennsylvania, has developed a computer program that will assist market participants with XPO pricing."
  9. Maybe someone's having a laugh.
    #10     Dec 15, 2005