Any option writers out there?

jackson8 · 22 March 2009

have recently been following twitter site of a us. trader named mark wolfinger

link below
http://search.twitter.com/search?max_id=1364823918&page=1&q=+markwolfinger

seems he only trades russell 2000 index and uses iron condor strategy's

comments on last trade as below
RUT: Covered Jun 420/430C spread and sold twice as many Jun 490/500C spreads. Then sold Jun 320/300P spreads to complete IC. Credit $0.90

rut was trading aprox 415-420 , that would place his june sold call of 490 aprox 15-20% above trading price also same with puts of 320

comparison on xjo would be a selling a june call of same % otm at 4000-4200 aprox.

would you even get quotes on spreads that far out of the money? i dont recall ever seeing so, mainly quotes 3-4 strikes above and below actual current index price.
not much liquidity in far out months wotm

would this be why most of serious aussie op traders only trade us. market?

also have any of you read his book .....the rookies guide to options......by mark d wolfinger?

gary

Grinder · 22 March 2009

jackson8 said:
comparison on xjo would be a selling a june call of same % otm at 4000-4200 aprox.

would you even get quotes on spreads that far out of the money? i dont recall ever seeing so, mainly quotes 3-4 strikes above and below actual current index price.
not much liquidity in far out months wotm

You can get MM quotes via a request from your broker

jackson8 said:
also have any of you read his book .....the rookies guide to options......by mark d wolfinger?

Have'nt read his book but know of him. He's takes on a fairly conservative approach to trading ICs. His blog has lots of helpful hints and I'm sure his rookies book would be equally as informative. Think you might be able to download an amended free version from his site.

sails · 27 March 2009

jackson8 said:
have taken all comments onboard and think i will watch from the sidelines and see what happens

interesting day today as the fed. ann. should be out today unless extended

I guess you have already seen the news that OZL have gone into a trading halt. Are you still on the sidelines, Gary?

cutz · 31 March 2009

Interesting to see a bunch of 40 point puts being exercised. I’m trying to get my head around why an OZL holder would want to exercise an OTM put, (last sale 55.5 points)

sails · 31 March 2009

cutz said:
Interesting to see a bunch of 40 point puts being exercised. I’m trying to get my head around why an OZL holder would want to exercise an OTM put, (last sale 55.5 points)

Yeah, I saw that this morning - 80 exercised of 200 previously in open interest. It is strange because the 50c and 60c puts have over 700 OI on each and yet they were not exercised.

Perhaps they needed the funds from the sale of their shares or just decided to get their shares out and move on. Possibly someone who doesn't believe the share price will exceed 40c in the near future. Not much fun for the short put holder...

jackson8 · 31 March 2009

sails said:
I guess you have already seen the news that OZL have gone into a trading halt. Are you still on the sidelines, Gary?

yes decided to watch from sidelines on this one
and glad i did with the trading halt and who knows what could happen from here on

as you mentioned earlier sails an extended trading halt or a suspension would have blown my strategy out of the water
thanks for your insightful thoughts
Gary

sails · 31 March 2009

jackson8 said:
yes decided to watch from sidelines on this one
and glad i did with the trading halt and who knows what could happen from here on

as you mentioned earlier sails an extended trading halt or a suspension would have blown my strategy out of the water
thanks for your insightful thoughts
Gary

That's a relief, Gary It will be interesting to watch and see how it all pans out...

snail05 · 2 April 2009

Been watching the posts in ASF for sometime. This is my first post.

I've recently started writing options on XJO. As per the ASX site the trading hours for index options are from 6am to 5Pm and 5:30PM to 8PM, however on the Comsec website quotes only appear around 10:30am.

Is it possible to trade before 10:30am ? Also I don't see any activity after 4Pm. Is this a Comsec restriction ?

jackson8 · 2 April 2009

snail05 said:
Been watching the posts in ASF for sometime. This is my first post.

I've recently started writing options on XJO. As per the ASX site the trading hours for index options are from 6am to 5Pm and 5:30PM to 8PM, however on the Comsec website quotes only appear around 10:30am.

Is it possible to trade before 10:30am ? Also I don't see any activity after 4Pm. Is this a Comsec restriction ?

this link may answer some of your questions

http://www.asx.com.au/products/options/trading_information/trading_hours.htm

it contains the information below

Trading hours
The table below sets out the trading hours for equity options. All times are Sydney local times.

9am to 9.45am Report trade function available for overseas trade reporting
10am to 4pm Normal trading
4pm to 4.20pm Extended normal trading (without market maker obligations applying)
4.20pm to 5pm Manual late trading (based on existing late trading procedures)
5.01pm to 7am Overseas trading (based on existing late trading procedures)

The table below sets out the trading hours for index options. All times are Sydney local times.

5.30am to 6.00am Pre Open (only cancel, amend and required trade report permitted)
6.00am to 5.00pm Normal trading
5.00pm to 5.30pm Pre Night-Trading (only cancel, amend and required trade report permitted)
5.30pm to 8.00pm Night-trading (normal automated trading)
8.00pm Close

gary

i dont have information to explain commsec site trading hours someone else may know. have only traded between 10-4 pm

cutz · 3 April 2009

snail05 said:
Is it possible to trade before 10:30am ? Also I don't see any activity after 4Pm. Is this a Comsec restriction ?

G'Day,

Yeah, its possible to enter an XJO option order after 4, in fact today i put one in via commsec at 425pm, it got filled at 430pm.

Looking back at my order history i notice that the equity options get purged by the ASX at around 425pm and the XJO options get purged at around 5pm.

It's also possible to enter orders before 1030am but i prefer to wait until the spreads appear.

snail05 · 3 April 2009

Thanks Gary & Cutz. I guess I'll stick to 1030-4.

rossw · 7 April 2009

snail05 said:
Been watching the posts in ASF for sometime. This is my first post.

I've recently started writing options on XJO. As per the ASX site the trading hours for index options are from 6am to 5Pm and 5:30PM to 8PM, however on the Comsec website quotes only appear around 10:30am.

Is it possible to trade before 10:30am ? Also I don't see any activity after 4Pm. Is this a Comsec restriction ?

You can trade XJO options from 9:50, but it takes most market makers 20mins or so to get set and put their quotes in the market...
and they'll pull their quotes by 430 since the futures close then and there's nothing to hedge with

sails · 7 April 2009

rossw said:
You can trade XJO options from 9:50, but it takes most market makers 20mins or so to get set and put their quotes in the market...
and they'll pull their quotes by 430 since the futures close then and there's nothing to hedge with

Ross, I've often wondered why it takes Aus option market makers so long to get their quotes up on the board? In the US, option quotes are available immediately as the market opens.

I have found it can take up to an hour even on something like BHP if there is a fair bit of volatility. Wide spreads would be better than no spreads - can you explain at all what happens?

Any insight would be much appreciated!

jackson8 · 7 April 2009

sails said:
I have found it can take up to an hour even on something like BHP if there is a fair bit of volatility. Wide spreads would be better than no spreads - can you explain at all what happens?

Any insight would be much appreciated!

have noticed as well lack of quotes especially on days where there are large drops in overall market or the particular Sp i am watching

maybe mms just waiting for the market to settle down during that first half to one hour, the quoting would be automatically programed so may have some inbuilt protection built in during the opening phases

sails · 7 April 2009

jackson8 said:
have noticed as well lack of quotes especially on days where there are large drops in overall market or the particular Sp i am watching

maybe mms just waiting for the market to settle down during that first half to one hour, the quoting would be automatically programed so may have some inbuilt protection built in during the opening phases

Yes, that's what I've been told, but wondering if Rossw can explain why the US market makers can start quoting so quickly even when it's volatile compared to our Aus MMs who have to wait so long.

It's one of a few reasons that so many Aus retail option traders refuse to trade the Aus option market. There must be more to it because it doesn't make sense if they want customers. As I said before, even wide spreads would be better than a blank screen.

jackson8 · 15 April 2009

Hi all

On a couple of occasions have read mention of options and dividend payments?
Have not been able to find the threads where these were mentioned so will ask:

Are there any circumstances where the buyer or seller of a put or call option is liable for the payment of dividends

I can’t find information on this anywhere but I know I read recently on one of the threads where someone mentioned that they may be up for the dividend payment.

It has got me thinking and I just wish to clarify.

Thanks
Gary

sails · 15 April 2009

jackson8 said:
Hi all

On a couple of occasions have read mention of options and dividend payments?
Have not been able to find the threads where these were mentioned so will ask:

Are there any circumstances where the buyer or seller of a put or call option is liable for the payment of dividends

I can’t find information on this anywhere but I know I read recently on one of the threads where someone mentioned that they may be up for the dividend payment.

It has got me thinking and I just wish to clarify.

Thanks
Gary

Gary, the biggest danger is being short calls (without owning the stock) the day before x-div day that are at risk of assignment. If the short calls are assigned, you actually are liable to PAY the dividend.

If you own the underling stock, it will be called away which cancels out any dividend liability from short call assignment as the person exercising technically takes delivery of the stock and gets the dividend.

Call spreads are also a big danger for the simple reason that the long call doesn't carry the dividend - only the stock. So, if you had a bull call spread that was ITM and the short call was assigned, you would still have to pay the dividend. If this looks imminent, it pays to either close the position before xdiv day, or roll the short call up to get it out of harms way, or exercise the long call to ensure the dividend will be cancelled should the short stock be cancelled.

Hoadley has a useful "early exercise" tab on the Options Strategy Evaluation Tool. If all the dividend information is input correctly, it will come up with the strikes that are in danger of assignment.

Box spreads (pre-div) can show an attractive prior to a dividend (there was a thread on this a few years back), but the biggest problem is if the short call gets assigned - the dividend payment would far exceed the little credit received.

Hope this makes sense - typed it fairly quickly!

sails · 15 April 2009

Gary, these links have a bit more information:

ASX - Early exercise of ASX options: http://www.asx.com.au/products/options/trading_information/early_exercise.htm

Investopedia - Dividends, Interest Rates and Their Effect on Stock Options: http://www.investopedia.com/articles/optioninvestor/03/121003.asp

jackson8 · 15 April 2009

sails said:
Gary, the biggest danger is being short calls (without owning the stock) the day before x-div day that are at risk of assignment. If the short calls are assigned, you actually are liable to PAY the dividend.

If you own the underling stock, it will be called away which cancels out any dividend liability from short call assignment as the person exercising technically takes delivery of the stock and gets the dividend.

Call spreads are also a big danger for the simple reason that the long call doesn't carry the dividend - only the stock. So, if you had a bull call spread that was ITM and the short call was assigned, you would still have to pay the dividend. If this looks imminent, it pays to either close the position before xdiv day, or roll the short call up to get it out of harms way, or exercise the long call to ensure the dividend will be cancelled should the short stock be cancelled.

Hoadley has a useful "early exercise" tab on the Options Strategy Evaluation Tool. If all the dividend information is input correctly, it will come up with the strikes that are in danger of assignment.

Box spreads (pre-div) can show an attractive prior to a dividend (there was a thread on this a few years back), but the biggest problem is if the short call gets assigned - the dividend payment would far exceed the little credit received.

Hope this makes sense - typed it fairly quickly!

thanks sails

i just recently had some shares assigned early on a covered call i had sold and i could not reason why but then on checking i found that the next day was ex div so i presumed that they wanted to take delivery of the shares to receive the divvy so therefore i will not receive it.

i was thinking of rolling it out as the call ended being quite deep in the money but i was waiting for a pull back in the sp as there wasnt much in it for going out longer

did not take the div. into account . on checking open interest next day i see all contracts had been closed out

gary

sails · 15 April 2009

jackson8 said:
thanks sails

i just recently had some shares assigned early on a covered call i had sold and i could not reason why but then on checking i found that the next day was ex div so i presumed that they wanted to take delivery of the shares to receive the divvy so therefore i will not receive it.

i was thinking of rolling it out as the call ended being quite deep in the money but i was waiting for a pull back in the sp as there wasnt much in it for going out longer

did not take the div. into account . on checking open interest next day i see all contracts had been closed out

gary

Just as well you had the shares otherwise the divvy would have come out of your account. Calls are cheaper before x-div and puts are more expensive. Could be the reason you thought there wasn't enough in it to roll the calls - but you would have kept the divvy which was the trade off for rolling.

Live trading really does bring options theory to life. There is a lot to learn...

Any option writers out there?

jackson8

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