Strategy

Discussion in 'Options' started by Chuck Krug, Aug 4, 2011.

  1. MTE

    MTE

    You are long the dec futures contract, not short!
     
    #11     Aug 4, 2011
  2. yeah, short sep future
    short sep put

    long dec fut
    +short dec call
     
    #12     Aug 4, 2011
  3. MTE

    MTE

    So, this position is synthetically equivalent to:

    short sep 1255 call
    short dec 1240 put
     
    #13     Aug 4, 2011
  4. but my short put is covered because i am short the underlying
     
    #14     Aug 4, 2011
  5. joneog

    joneog

    You realize that the delta of the option changes, right?

    You are short volatility.
     
    #15     Aug 4, 2011
  6. yes
    vol for put and call was just over 20%
     
    #16     Aug 4, 2011
  7. MTE

    MTE

    No, it's not covered. The short futures contract has already been used up, so to speak, to form the short put position.

    You should really read up on synthetics.
     
    #17     Aug 4, 2011
  8. what do you mean?
    yes, the short put is covered by being short the underlying
     
    #18     Aug 4, 2011
  9. joneog: do you mean that being
    short the vix fut is the same position?
     
    #19     Aug 4, 2011
  10. joneog

    joneog

    what I'm trying to tell you is that MTE is correct. as he's made clear your trade is a complicated way of being short a sep call and short a dec put, a strangle spread between sep-dec. that is not a covered position. short a strangle = short vol. the calendar aspect just makes it slightly more complex.

    think of it another way. you're long es and short es in another month. but you're short two options.
     
    #20     Aug 4, 2011