B*S
发帖数: 1328 | 1 I am fairly new on option, but interested in leverage by trading
options...
I understand that option trading is much harder and challenging than stock
trading due to the intrinsic complexity and basically unlimited choices.
I appreciate if somebody can answer my question as follows:
Given that you are pretty sure about the price trend, say, up by 30% in
the next two months, what would be the best strategy to benefit from
option trading?
I know you can sell puts or buy calls, but how do you decid | L****a
发帖数: 572 | 2 Just go through calls of all strikes and expirations, and compute the payoff
, and select the maximum one. e.g. if the current stock is $100, and you are
sure it will go to $130, next month, then you can go through the calls of
all strikes and expirations, and simulate the option price of all these
strikes and expirations after 1 month using BS formula (assuming IV is fixed
, if you'd like) and select the best one. Some software allows you to do
that. However, if IV is not fixed, some strategies | L****a
发帖数: 572 | 3 c = F(St,IV,t | S0, Strike, Expiration) is determined by B-S formula.
Now you alerady know St,S0, IV, t, and c(t=0), so maximize
C(t=T)/c(t0) = F(St,IV,T=t | S0, Strike, Expiration)/c(t0) w.r.t all strikes
and Expirations. | B*S
发帖数: 1328 | 4 Thanks Laputa.
My thought was to pick the one just underwater, and select the best month.
That is too naive, right?
One more question: say if the strike price is 130. On the expiration day,
will the 100 call be priced at 30, or anything close? I can wait and see
myself next week, but my question is, is there a market at all on that day?
Based on the presumption that nobody will actually exercise the option, why
do they buy it as it's expiring? But if nobody buys, this game doesn't make
sense... | L****a
发帖数: 572 | 5 on the expiration day, it's close to 30, but not exactly 30. So
there's still price change there, so people will still sell and
buy to speculate or hedge. If the option is near at money, then
people may excercise or let it expire.
why
make
【在 B*S 的大作中提到】
: Thanks Laputa.
: My thought was to pick the one just underwater, and select the best month.
: That is too naive, right?
: One more question: say if the strike price is 130. On the expiration day,
: will the 100 call be priced at 30, or anything close? I can wait and see
: myself next week, but my question is, is there a market at all on that day?
: Based on the presumption that nobody will actually exercise the option, why
: do they buy it as it's expiring? But if nobody buys, this game doesn't make
: sense...
| B*S
发帖数: 1328 | 6 I read something about the BS formula. It seems to me that we can ignore all
other parts except for IV. I mean, we can simplify the premium at current
time as a function of IV only. As we "know" the price trend of the
underlying stock, so we buy option when IV is low as implied by the premium
price...
So we can select the lowest IV from the available striking months to
maximize the return.
Does that sound reasonable? | L****a
发帖数: 572 | 7 In theory, IV should be the same for all strikes and expiration, although
volatility skew indeed exists for different strikes and expiration. In
reality,
IV could be different, and buying option with low IV may give you some edges,
although those low IV may be caused by other factors.
If you already know the price move of the stock with 100% certainty. Then in
theory you should use infinite leverage, which reflects in options, you
should choose out of the money strikes and closer expiration.
al
【在 B*S 的大作中提到】
: I read something about the BS formula. It seems to me that we can ignore all
: other parts except for IV. I mean, we can simplify the premium at current
: time as a function of IV only. As we "know" the price trend of the
: underlying stock, so we buy option when IV is low as implied by the premium
: price...
: So we can select the lowest IV from the available striking months to
: maximize the return.
: Does that sound reasonable?
| B*S
发帖数: 1328 | 8
although
edges,
Then in
Thanks. I will watch tomorrow to see the expiration day behavior...
【在 L****a 的大作中提到】
: In theory, IV should be the same for all strikes and expiration, although
: volatility skew indeed exists for different strikes and expiration. In
: reality,
: IV could be different, and buying option with low IV may give you some edges,
: although those low IV may be caused by other factors.
: If you already know the price move of the stock with 100% certainty. Then in
: theory you should use infinite leverage, which reflects in options, you
: should choose out of the money strikes and closer expiration.
:
: al
| B*S
发帖数: 1328 | 9 Based on my observation, most people actually choose to exercise their
option. Probably those open interest are held by institutions.
They can short sale the underlying stock in the last day to hedge their call
option or buy for their puts. Like scalping the market, they can get some
safe, although small profit... |
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