All Questions
Tagged with option-strategies option-pricing
40
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Which option strikes are better to sell for mean reversion strategies [closed]
Suppose I have an underlying with following values:
Spot Price: 100 Average: 98
Now let's say this stock goes to 108 and according to systematic evaluation it is overbought. I want to take a short ...
- 111
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1
answer
75
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Potential arbitrage opportunity or fallacy?
Suppose we have two European options with the same expiration: a call priced at $c$ with strike price $K_1$ and a put priced at $p$ with $K_2 (>K_1)$. Further, suppose the zero-points of the two ...
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46
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Approximation of an Autocall (trigger 100%) with ATM options prices
thank you very much for trying to answer this question, and I hope it will be helpful to everyone in my situation.
I am preparing for an interview, and I've come across these three questions on the ...
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74
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A naive approach to choose a strike
The idea is to choose a strike base on the premium and historical data to have maximum profit.
For example a selling a (European) call.
$$Profit = Premium_K - (S(t) -K)^+$$
Replacing $(S(t) -K)^+$ for ...
- 1
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37
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Accounting of a stock put option for Monthly % Changes
am looking to backtest a strategy of systemic put buying on an equity index (e.g SPX Index) so say a strategy of buying 1Y 90% SPX Puts rolled 1 day prior to expiry.
As opposed to only calculating the ...
- 11
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238
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I can’t understand why the premium of two butterflies with same strike but different broadness are approximately the same
Consider the following premiums of calls option with different strikes.
C90 = 57.35
C95 = 52.55
C100 = 47.3
C105 = 42.9
C110 = 38.25
In this case, the butterfly 90-100-110 cost 1 and the 95-100-105 ...
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165
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Why should delta-neutral backspread always result in credit?
Natenberg mentions in chapter titled "Volatility Spreads" :
under the assumptions of a traditional theoretical pricing model, a delta-neutral ratio spread
where more options are purchased ...
- 207
2
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97
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What are some good books to get started with option theory? [duplicate]
Recently graduated in econometrics but starting to realize my knowledge is limited. Any and all tips are welcome!
- 142
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1
answer
209
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Why does bull call spread shows higher payoff than bull put spread?
I am trying to compare bull call spread and bull put spread for equity index option. For the options where the put call parity holds, I am getting a different payoff for bull call spread and bull put ...
- 65
2
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533
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Breeden and Litzenberger formula for pricing state-contingent claims
I am reading these two papers Prices of State-Contingent Claims Implicit in Option Prices and Implied Risk-Neutral Distribution: A Comparison of Estimation Methods. I understand how we get the formula ...
- 21
2
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1
answer
269
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How to find the price variance of an infinitely expanding Binomial Tree?
How to find the price variance of an asset in a Binomial Tree Model? Suppose the price of the Stock is $S_t$ at time $t$ and it has a probability of $p$ that will go up $u$ times to $u \cdot S_t$ and ...
- 355
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2
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216
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Why are there so many S&P 500 call options selling with strike @1000?
I am analysing option-implied RNDs and risk preferences for my masters thesis, so forgive me if I sound like a beginner in derivatives.
I use WRDS to download my historic options data. I am looking at ...
- 61
5
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288
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What put options would the Universa Tail Fund have bought?
According to this Bloomberg article, Universa was up 3,600% in March 2020, by hedging with extremely out-of-the-money puts: https://www.bloomberg.com/news/articles/2020-04-08/taleb-advised-universa-...
- 61
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107
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Why are these deep in-the-money FLEX options seemingly bought at a discount?
98% of the initial reference value is .98 x 267.88 dollars, which equals 262.52 dollars. However, the market value of each call contract they purchase is 247.42 dollars.
How are they purchasing these ...
- 61
2
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1
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120
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Confusion about optimal choices with exotic options
With exotic options, holders usually face choices at certain times. In my understanding, the price of the option is determined by assuming the optimal choice is taken and computing the discounted ...
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