Please...some honest advice..no insults I dont trade options, but did this one time I bought a ZBH9 138 put several weeks ago at 3 15/64 With the future currently at 128 12/32....... The bid is 5 x 7 22/64 ask is 5 x 9 63/64 With the intrinsic value well over 9....am I pretty much stuck with 7 22/64 if I want to get out now? I thought there was supposed to be a semi-legitimate spread offered ........ Any advice from someone with experience? ....Thanks.....
You own a 138 put; the underlying future is at 128'10 right now. You paid about 3 handles for this put. You could EXERCISE the put & become short US-H9 @ 138, then manage the position as you see fit. if you want a quick exit, you could exercise the option then offset your short futures position. PM me if you have any questions. Nice trade!
You never need to settle for less than the intrinsic value of an option on a futures contract. The clean easy way for you to lock in the intrinsic value is to simply buy a futures contract. Assuming the put is still ITM at expiration, your position will disappear when your short put is exercised. If the put is otm at expiration - then so much the better! Think it through and you'll see why. Come back if you're still confused. No insults, I promise.
In a market like this, I would buy a ZB future instead of trying to exit the long put in this "unfair" market. By buying the ZB, you lock in a profit. If the ZB continues to fall, you lock in your 10 points (minus the 3 15/64). If it rises and finishes ATM or slightly OTM, you get the same profit (10 points from the long future minus the 3 15/64). If it is rises, say 10 points above to 148, then you get 20 points from the long future minus the 3 15/64.
Thanks JW...got some similar advice offline from dmo. You both have me rethinking my trading of futures only. I may have to start looking at combining both the futures and options...I was traveling most of the last 5 weeks and although I was confident in the ZB dropping...it sure felt good to know my losses were limited....Thanks again everyone ps...glad I asked for honest answers
I trade the ZB and ZN. Look up my previous journals. Late last year and early this year I knew that a multi-day down move in the bonds was coming but I did not want to hold futures long-term, especially in today's environment. I explored my options (pardon the pun) and found TBT. It has very liquid options. The spread you describe is outrageous and I haven't seen anything like that with TBT. Take a look and see for yourself. I"ve added it to my list of swing trade / long-term hold instruments.