I came up with this options strategy for CRTX Nov'21 options: https://optioncreator.com/st6bw7z It uses 2 short straddles using strike 185 and strike 15. What do you think: is it tradable? See also: https://www.elitetrader.com/et/thre...ig-position-at-far-far-otm-185-strike.362166/ Attached are screenshots of all relevant data incl. the market data as of 2021-10-21-Th at mkt close:
I know practically nothing about options, but I know this...Anything with volume and liquidity can be traded. So ask yourself...Do your legs have volume and liquidity at the strikes you wish to trade at?
It's all present, just take a look at the attached two option tables (columns Volume and Open Interest, with the number of contracts). Still, this is a little bit different with options compared to stocks, as here one mostly can find a counterparty in market makers (MMs), if not other traders. And: in this example just 1 option was used. In practice one can trade them only in lotsizes of 100 (= 1 contract). so one simply can multiply to the desired # of contracts, each contract consisting of 100 options... As can be seen from the PL chart, the credit one earns is $30.49 per single option, ie. $3049 per contract, if things work out as expected in this strategy. A loss happens only if the underlying stock rises more than about 245% to above spot $200 or so from current $57.85. Here's also a link to the used data: https://finance.yahoo.com/quote/CRTX/options?date=1637280000&p=CRTX But this link shows always just the "current" (latest) data. And when the options expire on Nov 19 the data will not be avail anymore. Therefore I did attach static screenshots of the data as of yesterday for timeless reference... Beware: the "Implied Volatility" (IV) is available (or gets updated) only intraday; it updates only after the first x trades of the day, x >= 3 I guess. Initially it starts with 0. From my observation generally after the first regular market hour all IV's should be available...
This is... a confusing hash of words that can't even be fixed; it just needs to be thrown away. A standard options contract covers 100 shares of the underlying, so "a single option" implies control of 100 shares. Period. The strategy you're proposing is synthetically equivalent to a 2-lot 15/185 strangle, and consists of 4 legs - i.e., 4 options. The prices on this graph are off by some random amount since we're outside RTH, but it shows the risk graph correctly. Doing a bit of actual trading, or at least reviewing what's happened to other highly-volatile stocks in real life, would probably be helpful to you. For example, when GME and AMC spiked a while ago, most brokers BPR on those trades went from ~20% of notional to 100% - and there were LOTS of margin calls as a result. So, no: that's not the only way that a loss can happen on this trade. If the price did spike by $200 tomorrow, your P&L would be at least $30k in the red, per lot. I say "at least" because this presumes an unchanged IV... a vain hope for that kind of volatility, so it's likely to be quite a bit higher. I assume you realize that max loss on this trade is unlimited, right? Even if this was an actual concern, at 8k daily options trading volume in CRTX - low, but likely to be much higher given the current buzz about it - that would only take a few seconds, so there's nothing to "beware" of. Besides, there will be plenty of bids and offers stacked up even before the market opens. I understand that all these things can look like problems when your only exposure to options is academic with no experience at all, but in practice, it all works quite smoothly. The folks at the exchanges have a little experience doing this; e.g., CBOE alone handles about 9.6 million trades per day. (And to answer your initial question - at least the implied one - this trade does not look like a good idea at all.)
This is an equity option. On November 9-12 or so (cf. FDA site for the exact date) the company will present data for FDA decision. So, the big change in the underlying stock price will happen immediately after the data gets released for the FDA decision on the said decision day (D-Day), but till then normally no such a big move in stock price is to expect... @BlueWaterSailor, your chart shows exactly the same info as my chart. Till the D-Day of say Nov 12 this options trade will have earned much of the credit, from then on only a week till expiration day. I think I would close the position right after the D-Day when the IV normalizes the next day(s), since then the decision will have fallen and so afterwards no other big move is to expect... Of course one can also let it autom. expire to save work...
Selling 1x 15 straddle / 1x 185 straddle for a credit of $200 ... is the same position as selling 2 x 15-185 strangles for a credit of $30 ( $200 - $170 strike diff ) No need to trade ITM options and make it more complicated than necessary.
Thanks for such constructive and useful tips, always welcome. Is the result (I mean P/L and the risk points) really the same?
Yes, P/L same as positions synthetically equivalent if you dissect out the 15-185 box Try it in the analyser if you want to prove for your self
Cool! Thx! So, then this means any 2 straddles can be converted to a single strangle, and vice versa. Is this a new options math knowledge, or is it known in the industry already for a long time?