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ProShares Ultra VIX Short-Term Futures Message Board

  • danosza danosza Sep 7, 2013 11:37 PM Flag

    A straddle play


    A was contemplating playing a December straddle but the calls are 50-60% more expensive than the puts. Does anyone have an explanation?
    Unless investors sell naked calls, could it be posible this works as a hedge protecting the investors from a huge downside in UVXY? People selling the calls, pocket more premium to protect for a "sure" downside?
    I've seen this discrepancy at companies that pay dividend, where the calls are bumped up until the div is paid.
    Anyone? Any idea?

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    • u r wasting too much $ on...'straddles'. if u must, at least use strangles. but I say just short it and forget it.

      btw, use Black Scholes to get answers to options pricing.

    • joeydorknobinschmidtjunior Sep 9, 2013 7:47 AM Flag

      Nerd alert.

      Now that we know the strikes are different, we may want to start using the correct terminology here. We're talking about a Strangle, not a Straddle.

      end Nerd Alert.

    • "the calls are 50-60% more expensive than the puts. Does anyone have an explanation? "

      Two of the factors used to determine the cost of an option are the strike price and the interest rate.
      As the strike prices become more divergent from the pps, the differences will become more pronounced.

      As an example, AAPL is now 498.22 If you were to divide the price of the Dec 600.00 call, 5.50 by 600, you would get the cost per dollar of strike. Then multiply this value by 400 and you would get 3.66 which is just 0.01 above the listed price of 3.65 for the Dec 400.00 put. This is extremely close considering I have rounded the pps to 500.

    • When uvxy start gapping up, its gonna move very fast within few days ..
      Right now, i am just gonna play shorting vxx,tza,sds.. If the market condition changes, i am expecting $53-58 upside on uvxy..( the play is wait for it to gap up then buy dec. put , uvxy will reduce in 1/2 by dec.. Below $30)

    • joeydorknobinschmidtjunior Sep 8, 2013 12:29 PM Flag

      Ahh buddy. Welcome to the gear-set behind the watch face!

      If you could provide the actual prices of underlying, call and put that you would have paid, as well as Greeks at that moment it would much helpful to the discussion for everyone.

      Also, be familiar with the Straddle characteristics as volatility ebbs and flows, volatility smile etc.

      If you want a real world example of what you're seeing, then somewhere in the recent maze of threads here on Friday I reported a long put/short call (yes I am aware it's not you long straddle but same idea) of the same strike at the same time trade I did on uvxy. The results are as you have seen. I made far more money on the short calls than the long puts. If i recall the puts made 80 cents and the calls were 1.45 and the trades went on and off at the same time. It's not an anomaly. The move I mean. Whether I am going to profit or lose is another issue. I'm speaking of the move itself in the options.

      Providing particulars will help a lot and keep everyone on the same page. I used to capture the greeks myself when a trade was made, until i got it into my head exactly what was going on in detail, but frankly I am lazy now, accept how things work, forget what I used to know and only recall what I need to know. (IE I know the calls will make more than puts on these shorter term moves) Sometimes I have to think about these things when my brain gets prodded. Obtaining the above info sorts it all out.

      This could be one of the few decent threads made in weeks.

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