following option weeklys

Discussion in 'Options' started by ds2, Dec 20, 2006.

  1. ds2


    ive recently started following the weeklys on the spx and oex. do they always trade way above their theoretical value? thx
  2. ds2


    do any of you option traders, follow/trade the weeklys? volume seems pretty low. $spx.x is symbol on ameritrade
  3. ds2


    well its looks like the contracts trade high, which im confused by. i run the theorical data and look at it on ameritrade, and it seems the contracts are 3-4X! they do expire worthless if under the strike, why would they trade so high?? on the SPX , the 1410 puts opened trading around .50 a contract with 2 days left for expiration! the SPX had to drop like close to 18 points ,, thats too expensive for a drastic move like that
  4. People need to be compensated for being short gamma. That is probably why the options are priced "expensively".
  5. This question is a non sequitur--there's no such thing as a "theoretical value" unless you know the Volatility of the stock. Volatility for the purposes of options has very little to do with the historical volatility. Dividends, volatility skewing, exercise style, earnings, supply and demand, and a dozen other factors can all change the shape of the IV curve.

    15 points on the S&P is only 1% away. You don't think there's a reasonable chance that the S&P can move down 1% in 2 days? What are the chances the S&P loses 8% or more in the next 2 days? (hint: it's higher than you'd expect)

    You should read up on options 101 before you start selling gamma, otherwise you might as well just wire me your Ameritrade balance. :)
  6. ds2


    tks for the info, im just into buying cheap contracts and continue to repeat to myself my affirmations that im a master trader.. :)
  7. I have traded the weekly's (spx) but its risky business....strictly delta/gamma trade. Perhaps if you want to add deltas or make a directional bet. Problems are very wide strikes and not very liquid, mixed results with them so not my favorite trade.
  8. traded spx weeklies when I first started and was taking in like 5-7% returns/week. It was friggin awesome for 2 months. Then I got burned by the SET on one week where the SET was 9 points from Friday opening and I thought I was safe at 8.8 away after Thurs. close. The SET was basically the high for that friday.

    Not a fan anymore.