From the video. He mentioned that Bear Put Spreads > Naked Puts. Where he explained that Spreads has more advantage ( Lesser cost, less impact from IV crush, and less impact from Time Decay) while you lose your maximum profit (Max Profit got capped). I see how he use Option Strat to estimate what is the max profit he can made using Spreads.

But since you're not owning a 100 shares nor you have enough $$ to buy 100 shares (Naked Puts), I wonder if IBKR will recognize this type of "synthetic spreads"? And usually for spreads, you need to close both legs before expiry?

pls watch it again... he is comparing to buying puts... not selling naked puts...

also objective is different... buying puts is a directional play... buying bear put spreads is mostly income play... they are very different... also if you own 100 stock of sometime, you should also buy puts to hedge against crashing...

fyi a better comparison would be the put ratio backspread...

anyways brokers will let you do whatever as long as you have money to cover...

You. Need to do it from option page (i.e open up 2 order one shot)

Guys, correct me if I'm wrong.. from the image above.
Max Loss is $212 = This is the amount you need to paid in order to open the Bear Put Spreads.
Max Profit $288

So If AAPL on Expiry is <$155 = you can close the trade for $288.

**Net Profit will be = $288-$212 = $76/Contract <-- am i correct on this?

This post has been edited by Lon3Rang3r00: Jul 28 2022, 09:48 AM

thx, this website very usefull

???

Ramjade let me fix his post

[quote=Medufsaid,Jul 28 2022, 09:18 PM]
Ramjade let me fix his post
Hi, for Iron Condor/Bear Put Spread/Bull Put Spread strategies, need to close the position manually if using IBKR?
[/quote]

[/quote]


Thanks for fixing my post. Q: using IBKR, we need to close more than 2 leg option eg. Bull Put Spread, etc separately and can we close the legs simultaneously?

You can close 1 leg, you can close both. Just select close position.

This post has been edited by Ramjade: Jul 31 2022, 05:02 PM

[quote=esyap,Jul 31 2022, 10:21 AM]

[/quote]
Thanks for fixing my post. Q: using IBKR, we need to close more than 2 leg option eg. Bull Put Spread, etc separately and can we close the legs simultaneously?

[/quote]
unless closing one leg creates a margin call situation... then must close 2 legs...

Just curious, let's say it's Friday now and your Covered Calls is very out of the money. Instead of rolling it (which you need to pay commissions for closing and open trades) Is it Ok to do a Naked Calls expire on the following week/s? Assuming you're trading weekly/bi-weekly option.

deeply OTMs are like lottery tickets. buyers of lottery tickets will find their tickets expired worthless, with the occasional lucky one

that's why some will just close it off as they don't want to become a seller of lottery tickets

My PLTR CC Strike $10.50 expired today, and just like you said.... it's really unlikely for PLTR to shoot all the way from $9.10 --> $10.50. But anyway i think i'll just hold it as closing it via IBKR need to pay commission. Huh huh next week gotta lower my strike price

This post has been edited by Lon3Rang3r00: Aug 19 2022, 10:54 AM

Any kind hearted soul & heart can send me the Telegram invitation for the options as discussed in this forum?

TQTQ

This post has been edited by lctw87: Dec 13 2022, 01:35 PM

WSJ MARKETS: THE INTELLIGENT INVESTOR

Why Investors Are Piling into Funds That Promise Not to Beat the Stock Market
After great returns last year, covered-call funds are all the rage among income-oriented investors. But their high yields aren’t a free lunch.

https://www.wsj.com/articles/covered-call-e...share_permalink

WSJ MARKETS JOURNAL REPORTS: INVESTING MONTHLY

Options Investors Face Challenges in a Volatile, but Flat, Stock Market
The lack of a sustained move up or down in the market increases the likelihood that options contracts will expire worthless

https://www.wsj.com/articles/options-invest...share_permalink

Does anyone know how to price exchange option using binomial tree replication?

This is a similar version to my final exam question (with S_b changed to 100 = S_a)...



I tried replicating using delta_a shares of stock A and delta_b shares of stock B, but couldn't solve for either deltas...

Here's my trial:

First I create the one-step "ratio" binomial tree.

t = 0 --> t =1

S_a/S_b = 100/100 = 1 --> u*(S_a/S_b) = 2

or --> d*(S_a/S_b) = 0.5

Now start with delta_a shares of stock A and delta_b shares of stock B. Ratio at t = 0 = (delta_a*S_a)/(delta_b*S_b) = delta_a/delta_b

At t = 1, the ratio of the delta_a stock A over delta_b stock B becomes: (delta_*S_a)/(delta_b*S_b) = (delta_a/delta_b)*2 for the upside node and (delta_a/delta_b)*0.5 for the downside node.

And then I am stuck here... Not sure how to proceed.

This post has been edited by TOS: May 20 2023, 04:58 PM

For those who are interested, the solution is posted in the word file below (zipped as forum does not allow upload of .docx files):

 Exchange_Option_Binomial_Tree_Pricing.zip ( 13.23k ) Number of downloads: 10

Sorry, I forgot to include the solution for pricing the American exchange option yesterday. Yesterday's answer refers to the European exchange option only. Here's the new, updated answer file with the pricing of American exchange option:

 Exchange_Option_Binomial_Tree_Pricing.zip ( 13.83k ) Number of downloads: 6