TJ arbitrage, the buying and selling of the same item at a different price simultaneously, the possibility of a risk-free profit at zero cost hmmm. never looked at that with options, will check it out. Open my eyes wider, TJ what did you have in mind? Calendar orbitrage? Intramarket? some type of conversion? Box spreads? Thanks Michael
I did not know you were this ready to swing! Continue your practice because it will help in search for arbs, and because opportunities are not always available for the same idea. So you will need additional profit centers, and things are not exclusive. There are principles you build on, and ideas of what to look for and where to look. You also need capital, a good margining account, and lower transaction costs. One has to also define the arb in more precise terms. One should not equate arb as necessarily meaning zero risk. The term arb is essentially to search for situation where price risk is neuralized, but one has to check other potential risks such as the ability to stay in the position until the end or until profit appears, the risk that the broker charge fees not considered at the beginning, etc. Not all things can be written here. Will exchange over the emails. To get you going, here is where people generally start looking, but they generally do not find much. Also not everyone uses the same idea the same way. There is a place for innovation and creativity in arbs. Owning the stock is equivalent to owning a call and shorting a put. It is called put-call parity. You may want to take an option chain, and play with the numbers to see whether it is better to own the stock, or the two options combination. We can then talk later about other things/ideas/etc. I plan to send you a PM. Check your PM box.
Hi I trade normally Long calls /puts and do occassional bull call/put and bear call/put spread. I am trying to trade the weekly SPY (1000 shars=2 ES contracts I think ) options. SPY options -weekly has high volume and razer thin spreads unlike index options. Iam trying unsuccessfully Longing the next month option and selling the current week options. Theta burn is the only thing killing the weekly but it has higher volatality,delta and gamma. Could you apply your wisdom (with your OEX weekly trading experience) and suggest how do I go about it?
Kevin something or other You got me puzzled with that comment. BULL CALL/PUT BEAR CALL/PUT SPREAD What do you mean? _______________________________ Trading Journal: send me your email address please? Some things I'm doing could be considered proprietory. ( smile for an amateur ) You are also wanting to compare directional models often. I don't mind, but it is 2:30 a.m. and as an old man, I can't sleep all night. Anyway, I just ran my forecast for the trend and I still see UPSIDE despite short term contrary movement. Perhaps not much more upside, but some. 3 to 5 points above the current high anyway. From 513 where we currently are, maybe 12 points. Just my guess - I am after all an amateur.
Kevin "I trade normally Long calls /puts and do occasional bull call/put and bear call/put spread." _________________________ That is a new idea to me. How does it work? How do you profit? How long do you have to hold it, whatever the spread is?
hi Falcon I meant to say that 1. I buy simple (naked)call or puts with a directional bias. OR 1. Bullish view a.buy deep in the money /at the money call and sell a out of the money call (debit spread) b. Sell at the money put and buy a out of the money put (credit spread) 2. bearish view a.sell ATM call and but OTM call (credit) b.Buy ATM put and sell OTM put (debit ) Anyway Iam not that much expert. Weeklies are tricky due to high gamma and higher delta but higher theta too. I was wondering if you look at SPY options with your OEX experience . Great liquidity,tight spread & no assignment risk (of course stock will be assigned -not cash seetled /nor settled by futures)
Hi Kevin, Did you read my response to Falconview in relation to debit spreads? It is in line with what you wrote. How successful have been at it? The other related to this is not to over leverage. With spreads, one can easily make the mistake. I think there should be treated as risk limiter instruments.
Falconview, It seems to me that on the direction assessment, you do not seem to be an amateur at all. I am interested to compare, but also to get your opinion on your assessment of the forecast made by my analysis. My analysis is not a indicator/etc type of thing, but an analysis of a geeky type if I can described it that way. You did not sleep much, but in my case I slept a little tonight and I am feeling somewhat ill because of lack of sleep. I will PM you my email address, but I do not want to get my eyes reading some super proprietary material. So please do not feel you have to send anything. With regard to the estimate from model it is NOT end of bull leg estimate, but beginning of retreat. Models are still saying, leg is still up. If there is a retreat, the task becomes end of the retreat, and resumption of up move. PS: do you see the smiles on the left side. Click on one of them if you want to include them. Here one of them:
Trading Journal "With regard to the estimate from model it is NOT end of bull leg estimate, but beginning of retreat. Models are still saying, leg is still up. If there is a retreat, the task becomes end of the retreat, and resumption of up move." ------------------------------------------------- Well that is reassuring anyway! At least in that regard we are in agreement. Will wait for your email address. I guess I'll take a look at your wacky world of trend forecasting. I like your view that we are now looking for the bottom of this pullback. At least in the short term. I agree. We seem to be forming the TOP now? But since I use daily bars and charts, the confirmation for the top will probably come at the close tomorrow Friday. Will let you know what I see tomorrow. At any rate if I get confirmed tomorrow, then it is time to reverse to BEAR PUT DEBIT SPREADS and try my newly created system on that, in the last half hour of trading on Friday. Though I rather expect the market to go sideways, with a slow angle downward. For me that is forecasting waaaay into the future. This is the first time I'm concentrating on predicting accurately the turning point of trends. I'm guessing ONLY, but for WEEKLY options I'm figuring on expiration Friday at around 515 to 517 in the OEX. I don't have anything concrete on that, but maybe that will develop through today? In the meantime I am holding the overhead credit spread still, for 50 contracts at 525/530. ( .10 cents ) I'm looking to put on the completion of an IRON CONDOR this morning if I can get premium where I want it. I guess my BULL CALL DEBIT experimental SPREADS must be underwater? I kind of hope I get the 517 close tomorrow and can close them out and see how they worked. I rather took a chance on them as I knew the trend didn't have much life left in it. Still, I needed the knowledge and since they are scratch paper trades, as you say it doesn't matter. I take the paper trades in TOS very seriously though, as like in real money. Since the DEBIT spreads are done on Monthly premiums, there is no hurry on them. I can wait until next week evolves.