Questions tagged [option-strategies]
The option-strategies tag has no usage guidance.
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Using delta as probability of an option expiring in the money
I understand that delta can be seen as a probability proxy for an option expiring in the money, as well as deltas for call options ranging from 0 to 1 and deltas for put options ranging from 0 to -1.
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What is a skew swap?
I'm watching a video where hedge fund manager Cem Karsan describes the basics of his strategy as a "skew swap". I understand that he's buying/selling index options at different maturities to ...
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Delta hedge swaption straddle
Let's say you decide to buy a 2Y10Y ATM swaption straddle (i.e. buy 10 million ATM payer swaption and buy 10 million ATM receiver swaption).
In order to delta hedge, I believe you would short the ...
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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 ...
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Best/worst case scenario after selling OTM call option
You decide to sell a European call option that is currently 10% OTM (for example the strike = 100 and the current price = 90). You have to delta hedge to keep the delta of your position at 0.
What is ...
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How to backtest multilegged options strategies?
I have got historical data for the index options. Now I am looking at backtesting some of my strategies with this historical data. I would like to backtest strategies like selling a straddle and ...
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Finding optimal calendar spreads and diagonals
I am looking for some pointers on risk/return profiles of calendar spreads and diagonals with different strikes and expiration dates, preferably based on historical backtests with SPY options.
Please ...
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On P and L of backspread
Does anyone know how the P and L on put backspread changes as a function of implied volatility and longer expiration?
One wants as much gamma as possible as far as I understand, in turn being related ...
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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 ...
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Valuing Option Credit Spreads
I'm trying to come up with a metric to value and compare spreads. One way that I was doing this was to compute the Expected Value of the spread.
To calculate the expected value I used the following ...
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What is this option strategy called?
I have been playing with option strategies in order to understand the advantages/drawbacks of all of them.
Then I realized this type of strategy is not so advertised in the web and cannot find any &...
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What's a sensible way to measure correlation in the volatility surface?
Lets say I construct a parametrisation of the volatility surface that lets me infer dynamics i.e correlation between strike vol.
Is computing the sample correlation (after controlling for spot-vol ...
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Barrier Reverse Convertible
I am a finance student and during my free time I try to understand more financial products.
Today I have found a term sheet for a specific type of barrier reverse convertible but I couldn't understand ...
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What kind of stock's prices are most affected by option trading?
Option trading translates into stock trading via market maker hedging. For instance, if I buy a call option, the market maker will have to buy the stock to delta hedge. Thus, this should translate ...
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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 ...
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