Comments on: Weekly Option Expirations

By: Bruce

Bruce — Fri, 12 Mar 2010 19:15:00 +0000

I am not sure I understand your comment Option Expert. How can an option gap after hours? Or do you simply mean the underling (which in this case means 100 stocks have to gap up or down).nnAs for assignment can’t you beat that with the European settled XEO instead of OEX or does that not have weeklies?

By: Bruce

Bruce — Fri, 12 Mar 2010 17:15:09 +0000

I am not sure I understand your comment Option Expert. How can an option gap after hours? Or do you simply mean the underling (which in this case means 100 stocks have to gap up or down).

As for assignment can't you beat that with the European settled XEO instead of OEX or does that not have weeklies?

By: Jeff W

Jeff W — Tue, 09 Mar 2010 08:52:49 +0000

Option Expert,

Thanks for the comment. You are absolutely correct about the danger on cash settled indices. I actually wrote a post about it titled “A Few Words about Index Options – Be Careful” that you can read using this link: http://wp.me/pCyRr-hg

I hope you didn't read that I was telling anyone to do anything. I try to avoid any comment like that. I am simply relaying what I am doing (please see my Disclaimer).

◄ Jeff ►

By: Option Expert

Option Expert — Mon, 08 Mar 2010 22:46:07 +0000

You should be careful telling traders to sell options on the OEX as it can gap down aftermarket and you will be exercised (exercise price reverts to 4pm ET the previous close). They will then be cash settled and you will owe the difference, yet your long position gets hammered. This causes you to lose tremendously more than initially measured in your Risk Analysis. Just an FYI!

By: Tim

Tim — Sat, 27 Feb 2010 18:21:41 +0000

Okay, finally clear now. So you are wanting the OEX to continue in this narrow range allowing the front month MAR1 to decrease in value rapidly in the next day or two. And the Margin requirement is Zero as covered by the far month

By: Jeff W

Jeff W — Sat, 27 Feb 2010 17:12:02 +0000

Tim,

It can get a bit confusing: Both your Puts should be at 500 and both your Calls at 510. The debit shows as 6.55 right now. Check out the pic at the link below - it's exactly how your order should look in the Analyze tab.
http://bit.ly/ddBtrm

◄ Jeff ►

By: Tim

Tim — Sat, 27 Feb 2010 16:48:57 +0000

Thanks for jumping right back with the response and I think I have it loaded in TOS.
To verify, Is this correct on the order/trade:
S Mar1 500 C and P
B Mar 510 C and P
for a debit of …

By: Jeff W

Jeff W — Sat, 27 Feb 2010 16:13:28 +0000

Tim,

Thanks for the encouraging feedback.

This isn't a custom order - the combo is buried in the drop down menu. First select Buy, then slide down to Double Diagonal (near the bottom) then select Double Calendar. Start at the front month (MAR1) and at the Call strike you want. Once the order is created (either in Analyze or Trade tab), you can adjust expirations and strikes.

◄ Jeff ►

By: Jeff W

Jeff W — Sat, 27 Feb 2010 15:51:02 +0000

Other Jeff,

Great to hear from you! SPX and OEX are cash settled indexes (can't buy shares), so you would have to actually do a Calendar with the Long Call out several months. You know my butt would get chewed out if I put that into the justcoveredcalls group. However, it is a subject that may be suitable to ConservativeOptionStrategies or MarketStudent Yahoo groups.

I need to do a bit more research and test it out. I will be posting about this in the future, so keep an eye out for it.

◄ Jeff ►

By: Jeff Partlow

Jeff Partlow — Sat, 27 Feb 2010 12:46:45 +0000

Jeff,

Using these weekly options is an innovative strategy idea on your part. Would you consider making a post on the JustCoveredCalls group in this regard?

Thanks for your consideration.

Best wishes,
Jeff P (the other Jeff)