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Listen "Option Block 402: Yield Hunters Out In Force"
Episode Synopsis
Option Block 402: Yield Hunters Out In Force
Trading Block: A sea of green across the board today. After the bell today: Starbucks - Time to get your Starbucks (stock) again? - ATM straddle approx. $1.70
Odd Block: Calls trade in W&T Offshore, Inc. (WTI), Put buyers in Nielsen Holdings NV (NLSN), and Calls trade in KB Home (KBH)
Xpress Block: Alex discusses the FX markets and also the covered write tool in the Idea Hub
Mail Block: Questions from our listeners.
Question from Tom A Bomb - Fine-hatted Gentlemen, A question for the Option Block regarding verticals: First, you all rock. Best show on the network! Thank you OX. I have been trading high-leverage verticals for a while now and I am looking for a quick way to price em. I place emphasis on quick. I.e. Without running a model on the individual legs. I have taken (rightly or wrongly) to using the probability of a finish beyond the short strike multiplied by the width of the spread. For example, XYZ has a 30% chance of finishing above $50 by expiration. I am long a 45/50 call spread. So, at 30% times 5, I would expect the mid-price to be around $1.5 for the spread. On balance, this method seems to under-price positive delta, and often significantly over-price negative delta. Is this method complete crap? Any suggestions?
Around the Block: Lots of earnings around the corner.
Trading Block: A sea of green across the board today. After the bell today: Starbucks - Time to get your Starbucks (stock) again? - ATM straddle approx. $1.70
Odd Block: Calls trade in W&T Offshore, Inc. (WTI), Put buyers in Nielsen Holdings NV (NLSN), and Calls trade in KB Home (KBH)
Xpress Block: Alex discusses the FX markets and also the covered write tool in the Idea Hub
Mail Block: Questions from our listeners.
Question from Tom A Bomb - Fine-hatted Gentlemen, A question for the Option Block regarding verticals: First, you all rock. Best show on the network! Thank you OX. I have been trading high-leverage verticals for a while now and I am looking for a quick way to price em. I place emphasis on quick. I.e. Without running a model on the individual legs. I have taken (rightly or wrongly) to using the probability of a finish beyond the short strike multiplied by the width of the spread. For example, XYZ has a 30% chance of finishing above $50 by expiration. I am long a 45/50 call spread. So, at 30% times 5, I would expect the mid-price to be around $1.5 for the spread. On balance, this method seems to under-price positive delta, and often significantly over-price negative delta. Is this method complete crap? Any suggestions?
Around the Block: Lots of earnings around the corner.
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