Trajan, Why would anyone bother with a trade that has zero risk (commissions) and has only upside? Like I said above, if I _could_ put this spread trade on as described above, over 100 or 1000 underlyings, my expentancy for a profit over the space of all those trades, including comissions, would be ENORMOUS. nitro
Instead of trying to leg into the 10/20 call spread for 10, why don't you try and leg into th3 15/20 call spread for 5 ? By selling the 15 strike instead of the 10 strike, you're selling more premium against the premium you're buying. Obviously you don't make any money under 15, but making 5 on the trade would still be huge. Just something to think about. Vega
Nitro, Any professional would do this trade (if it existed without legging) as much as they could. The majority of the time, you would lose commissions (in the case of a professional like Metooxx it would be small), but the one little chance that the stock blows up, you will hit a home run.
The selling the 10-20 call spread at 10 would be much more superior than selling the 15-20 call spread at 5. Between 15 and 20, both would yield the same amount of profit, but at 15 and below the 10-20 would provide much more profit than the 15-20 (the 15-20 is capped out at 15). Plus, if you do the 10-20 in size, the extra 5 points would generate a little bit more income from interest.
I agree 100000000000% If I could trade like metoo, I wouldn't hesistate for 1/1000000th of a second. nitro
.....are every trader's dream!!!!!!! Obviously if you can put on no risk trades, with huge profit potential you would do that as many times as your account allows you. The MMs are not going to give you a free lottery ticket, if you leg into the spread, then yes, you have no risk, but you're still taking the risk of legging into it, and even if you leg into the spread for less than 10, as long as the difference is less than the price of the 10/20 put spread, you've done a good job. And yes, I know that collecting interest on 10 will get you more interest than collecting on 5, no matter how much size you do. I was merely stating that you allow yourself a little more room for error on the leg by selling the additional premium in the 15 strike. Vega
I don't think you guys understand. Please pardon me for the caps, but IT MAKES NO DIFFERENCE WHETHER YOU LEG INTO THE 10/20 CALL SPREAD FOR A TEN DOLLAR CREDIT OR BUY A 20 CALL AND SELL STOCK FOR ZERO OVER PARITY. You will profit the same either way(maybe more with the latter if the stock goes below 10) with EXACTLY THE SAME RISK PROFILE, in other words none, zilch, nada, but you will have lower commission costs(its cheaper to trade stock) and you will have a tighter spread on the BID/ASK. The bid on those 10 calls is below parity. Would you rather sell stock at 22.09 or 22? It doesn't mean you can't use the 10s as stock(pick off,order sitting in the book or maybe be bigger size); I use deep itms all the time, but it in this scenario stock looks better.
I would just like to add that you have the right idea, but just need to get down all the relationships and synthetics. Couple that with some creativity and options will seam a hell of a lot easier. Volatility, on the other hand, is more difficult, it will take a lot more work and experience.