Synthetic SPY/GLD Option - How to build it?

Discussion in 'Options' started by tradingjournals, Jun 20, 2011.

  1. How to build a SPY/GLD option using SPY, GLD and possibly the options on other instruments? By SPY/GLD options, I mean an option where cash is replaced by GLD when compared to regular SPY options.
     
  2. rmorse

    rmorse Sponsor


    I feel like I'm missing something. I'd like to help but I don't understand what your trying to do and why.
     
  3. Image a market where the currency used to settle the options is GLD units rather than the dollar. So I want to know how to build a synthetic SPY/GLD option that would mimic what the imaginary market would do.
     
  4. Lucias

    Lucias

    When you go long spy, you sell the dollar. So, if you wanted this you'd be long spy and short gold. When you close position, you'd be going short spy/ long gold. you may be thinking about long spy/short dollar
     
  5. An example: Suppose I want to buy a SPY call option, but this time a call option as if GLD were the cash.
     
  6. $1540.00 = 1 ounce of gold. Buy $1540.00 worth of calls?
     
  7. rmorse

    rmorse Sponsor

    If your looking to buy SPY in GLD currency, you would want to buy SPY and short GLD dollar neutral. Once you calculate the share positions, so can execute the correct deltas you need with whatever options you feel are best.
     
    • One ounce of gold = $1540.00
    • Buy $1540.00 SPY
    • Sell $1540.00 GLD
     
  8. I am inquiring about the options -- assymetric risk-reward.
     
  9. rmorse

    rmorse Sponsor

    I can't recommend how I would execute the deltas without examining the current option markets. You would also have to take into account your risk tolerance and expectations. No one here can suggest the best way to accomplish this for your trading without making a lot of assumptions. Sorry.......good luck, interesting strategy. What makes you want to take that side of the trade?
     
    #10     Jun 20, 2011