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It all depends on the size you are dealing with. You can consider
$30 a dinner for one and buy the straddle as a one lot. If you are
dealing in size then it starts to add up. a 10 lot is $300 and a
100 lot is $3000. At what level do you consider it real money?
In options you need every edge that you can get. When I was a market
maker I knew traders that would trade large size for that type of an edge.
They would do size for an 1/8 edge, $12.50. The thing is a trader
will sell you the straddle for that edge and then trade out of both sides
or put on other spreads using the legs of the straddle to pocket that edge.
John Manasco wrote:
So in your example the theoretical value of
the straddle is 10.096 and the actual value is 10.126, a difference of
.30. Is this a significant enough difference to assume the straddle is
overvalued? The value seems small and I often wonder if it's just noise
or if my data is not as accurate enough to make a decision. Thanks
for your insight. John
Manasco
<blockquote dir=ltr
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
----- Original Message -----
<div
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Ira Tunik
To: realtraders@xxxxxxxxxxx
Sent: Friday, November 17, 2000 8:32
AM
Subject: Re: AW: [RT] Market ESZ0
John Manasco wrote:
Ira,
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