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Warning, many naive questions ahead. :-) I've never learned my way
around options very well, particularly futures options. I (and I'd
bet many others) would appreciate it a LOT if you options wizards
would fill in a few details beyond the "options are good" level.
Ira wrote:
> If you are using options as a stop you don't need to be delta
> aware. You just have to define the risk. If the call/put is at the
> money it is the cost of the option plus or minus the amount above
> or below the strike price. Deltas are only applicable if you
> intend to trade the options and the futures in a specific strategy.
But... How do you know how many options to buy?
For example, I assumed you would need to know the delta to know how
many options it takes to offset your futures position. The delta is
the amount the option will change per 1 point of the underlying,
right? So if the delta is 0.5, it would take 2 options to exactly
balance each future, correct? Or do you just wet-finger it, or ...?
How do you figure the profit/loss on the future/option spread given a
particular price change over a particular period of time?
Do you pay attention to theta to get an idea for the daily cost of
the option?
To protect your position, do you buy at-the-money, or out-of-the-
money, and why?
How do you know what is a good price for an option? Do you figure
the fair value using Black-Scholes, or what?
Are there any good online tutorials to get one's feet wet in this? I
tried looking on the CBOE site and searched several search engines
but couldn't find anything useful. If no online sources, what is a
good book?
What about a good site for current option data, e.g. prices, greeks,
etc? There used to be a good site at http://cboe.pcquote.com/cgi-
bin/cboeopt.exe but it seems to be down now -- maybe a temporary
problem. But of course it's 20 mins delayed, so you couldn't use
that for realtime trading. (Or could you? Could you use the 20-min-
old options data, along with knowledge of the current price of the
underlying, to determine the current "right" values for the option?)
For those of us on TradeStation, how do you track all those option
symbols? Or is is it impractical to use TS with options?
There, that should start some discussion.... :-)
Thanks,
Gary
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