|
PureBytes Links
Trading Reference Links
|
>Wasn't this a main strategy George Fontanalis used in his option trading seminar?
Don't know what Fontanalis used. This delta neutral stuff is very common so I suspect a lot of people teach it.
>Have you ever heard of synthetic futures positions where you go say long say the bonds and short an >equivlent (value-wise) number of options?
Technically, a synthetic futures (long) is buy a call, sell a put at the same strike and expiry. A synthetic short is buy a put, sell a call, same strike, same expiry. If the futures are at 100.00, long the synthetic at a 95.00 stike will cost exactly 5.00. This is called put/call parity. If the synthetic were priced at anything else, arbitrageurs could buy the cheaper (synthetic or futures), sell the more expensive (other) and lock in a risk-free return.
>his could be seen a delta nerutral positions of sort where trader can collect time premium going short options >hile protecting herself from any major price shock going long the underlying.
I suspect what you are describing is a covered call, or possibly a type of ratio spread.
A covered call is long 1 underlying, short 1 call. You collect some premium that will protect you on the downside *only to the extent of the premium received*. In return, you forfeit all upside potential beyond the strike of the short call.
A call ratio spread is long 1 call (or futures) short 2 or more calls at a higher strike. Here you've collected more premium to protect your downside at the expense of liability on the upside. Should price explode on the upside you'll be net short at least 1 call which can cost *a lot* to cover due to the presumed accompanying explosion in IV. Just as sure as the sun rises, a price shock is accompanied by a spike in IV. It's a double whammy that those who have experienced being short IV during a unexpected price shock don't forget easily.
Both books I recommended cover these and many more strategies. Of course I'm sure you know there is no free lunch. Each strategy has strengths at a cost.
Hope this helps.
Good trading,
Scott H.
|