The AMEX FRO (Fixed Return Options) Thread

Please do, spreads on what one would assume would be liquid (QQQQ, DIA) are not exactly tight..

 

I wonder if there is a merit to use both FRO and vanilla for a dispersion trade.
Long basket’s calls and buy FL atm FRO’s (on index)

 

I'd imagine the edge loss and lacking volume wouldn't support a profitable dispersion trade.

 

Amused that some think that 'binary' means 'gambling', as if everything else wasn't.

Nothing binary about a horse race either. (Unless you think win or lose means binary). Guess that's not gambling.

 

IMO I prefer better odds then binary.

 

What does that even mean? Whether it's binary or not has nothing to do with your odds.

 

Actually, it's identical to payouts on horseracing or any limited-risk odds-based binary outcome and flow impacts odds in racing and volatility in option-markets. Wagers impact odds just as in any volatility market, or any market for that matter. The zero-sum parimutuel pool is a good analogy to the payout in binary options.

 

My head hurts.

 

no

 

It's a zero sum analogy taking into account fixed odds. I realize that there are typically only two counterparties to an exotic option transaction [parimutuel comment]. It's an analogy to something underwritten/offered to >1 investor or the payoff on the OI of an individual listed contract. The payout-analogy sticks on any fixed-odds exotic. The parimutuel analogy is a bit stretched.