This is a mobile optimized page that loads fast, if you want to load the real page, click this text.

Liquid Options

Jump to new

wayneL

VIVA LA LIBERTAD, CARAJO!
Joined
9 July 2004
Posts
26,610
Reactions
14,339
Coming back to Aus trading, I have come to the point of sorting out liquid option series.

This involved the labourious process of finding the total open interest in each of the option series as the quick and dirty guide to option liquidity.

FYI these are the series with OI > 20,000

bhp 180000
xjo 165000
nws 83000
cba 76000
rio 76000
nab 75000
wbc 73000
anz 60000
qan 60000
osh 55000
amp 53000
lhg 50000
bsl 47000
mig 39000
iag 38000
awc 36000
fgl 36000
wpl 35000
wow 30000
amc 25000
mbl 25000
sgb 22000
cml 22000
rin 21000
sto 21000
map 20000
ncm 20000

Firstly, any of you option traders have further comments to this list? Any symbols that should be scrapped for reasons that are not obvious etc?

Secondly, I have noticed something serious. Most of the OI is in the OTM options, with almost zero OI in the ITM options of the less liquid series.

What is that? Doesn't anyone trade ITM options? It is no wonder most expire worthless.

I'm used to heaps of liquidity and OI right down, way deep into the money. Any comments here?

Cheers
 
wayneL said:
What is that? Doesn't anyone trade ITM options? It is no wonder most expire worthless.

I'm used to heaps of liquidity and OI right down, way deep into the money. Any comments here?Cheers
Click to expand...

Don't quote me here, but perhaps traders prefer to use warrants for ITM trades. The warrant market market seems to me to be quite well serviced. Also, traded over seats, so a little cheaper.

(Again, my comments may be rubbish)
 
Wayne - trading options in Oz has it's challenges... Definately limitations here and yes, ITM's are not so liquid and the bid/ask spreads become quite wide. The only other thing is there has been quite a few shares go ex-div recently which wipes out most of the ITM call OI - eg CBA did have a lot more ITM calls until 20th Feb.

Otherwise, the stocks you have sorted out are about as good as it gets. I usually avoid the small priced stocks as it means trading more contracts and there is the ACH fees of $1.12 for each contract - in and out. Eg - NCM is around $21 and LHG is $2.18 - technically need approx 10 contracts of LHG for every 1 of NCM - that saves $18 round trip on fees just to the ACH. Also, the higher priced shares have more strikes when compared percentage wise to the lower priced ones. Guess it really depends on your trading style.

I don't trade all the stocks you have sorted out - but some may still only have 3 monthly series (XJO is only 3 monthly). Some of the MM's are really good - others not so helpful. Have often had to buy at the offer / sell at the bid on CBA as they sometimes won't budge even for 1c away from their prices Find it much easier to get filled near the mid price is placing combo orders - but then the fees are doubled. BHP is by far the easiest for trading options as they would have the most liquidity - but subject to overnight gaps.

Interesting to see if any other option traders have anything to add - hope this helps!

Cheers,
Margaret.
 
I see. I have been looking at deeply ITM warrants such as MIGIZZ and MIGIZK which to me seem to be fairly priced. MIGIZZ delta=1 and MIGIZK delta=.92 (last time I looked). Both have interest rate of a little over 7%.

Could I have got a better deal with options?

(dont want to drag the thread offtopic though)
 
Agree that you seem to have a good deal there and as there is no 210 option strike price for Dec06 it is not possible to know if a better deal exists. The chart I posted was very close to the money, so that could explain the difference. Anyway, thanks for the imput.
 
OK Margaret, Mark, Dutchie, thanks for the replies and links, that's very helpful.

Re warrants v options

As far as I'm concerned warrants don't suit (but thanks for the suggestion markmrau ) and here's why.

1/ You can only go long on warrants. In itself this is not a problem as I don't short ITM options. But more often than not I buy ITM options as part of a spread. Buying warrants for the long leg and shorting options for the short legs would blow out margin big time as effectively I would be naked short as far as ACH is concerned.

2/ Most warrants have this multiplier business. It's a rort, as it effectively quadruples the bid/ask spread and enables them to hide higher extrinsic pricing in nearer to the money series.

How much additional extrinsic valued is added to deep ITM warrants over options I haven't been able to ascertain as yet, but every little bit counts.

The attractive feature of them is as mark points out, trading via seats. But for what I'm trying to achieve this is not enough.

I may have to limit myself to the top few series

Can see you heading back to the US markets as you'll soon get frustrated with Oz options!
Click to expand...

Well my reason for deserting the US market is actually more than the frivolous reasons I previously stated and is actually more to do with ethics. I no longer have faith in the US as a nation and the less to do with them the better. They are the Evil Empire as far as I am concerned.... and I come from there
 
Unfortunate that you feel that way WayneL if thats where you came from.

I would assume that some of the Asian markets would have options - would that be worth looking into (eg Hong Kong).
 
dutchie said:
Unfortunate that you feel that way WayneL if thats where you came from.

I would assume that some of the Asian markets would have options - would that be worth looking into (eg Hong Kong).
Click to expand...

Apparently the Korean Kospi has a fantastic options market, haven't looked into it yet though.

Cheers
 
You must log in or register to reply here.
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more...