FOREX - Trends, Forecasts and Implications 2015(continued) - page 408
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I don't understand anything, I have great doubts that you and the Master understand yourselves.
And you guessed it, there will be no balloon.
18.10.2011 06:21 #98
donetz
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During the option week it is simply not profitable to fly away. I.e., we are only talking about the option week - the last one before expiry. What happens outside of that week has nothing to do with these pricks. The price of an instrument at the time of expiry should, in theory, minimise the payout. From here on it is as easy as pie.
How does the trading week usually go? We go one way, then the other, and somewhere in between we close. The sense of such movements is simple - increasing profits and decreasing expenses by the time of expiry. The idea that can be theoretically tested is as follows:
Assume that the bigwigs ruling the market are sellers of options (both puts and calls at the same time). These options are bought by hedgers during the life of the option contract (they are the ones who create liquidity in options, which is historically low). To maximize the profit of the hedgers, they must make an effort in the market to close the options at a price that minimizes the total payout on the sum of the calls and puts in the money. And in doing so, you can still make some extra money. You can't manipulate the market for long, but you can in the short term. That's why it's difficult to work in an expirational week, for it is strongly manipulated.
At the entry to the expirational week we calculate the minimum payout point and assume that it won't change during the week because it was accumulated for a long time by hedgers' purchases and there is no reason to pay them more.
Then a pullback in one direction, for example, downwards. Here the fearful hedgers additionally buy higher-priced puts, which will not be exercised, i.e. they will expire without money. This will increase the profit of the options sellers by the amount of premium on these additional puts sold in the expiry week, and in addition, the sellers will buy cheaper calls (speculative buyers in this situation), which will be exercised, i.e., put in the money (i.e., with a strike below the minimum payout to put in the money at expiration time).
After that, a spurt in the opposite direction - selling as much as possible higher-priced calls to hedgers, which were purchased on the downward spurt, the hedgers respectively get into calls, which also will not be executed. You can buy more cheaper puts with a strike higher than the minimum payout point to get in the money at the time of execution.
And the last part is a return to the minimum payout point at the time of expiration, where the hedgers are paid the minimum total amount in the money, and the remaining options, bought by the big guys on the spurt, are expired at a profit.
That's it, the game is done. Expense is minimised, because we are at the point with the minimum payout; income is maximised: on the one hand, through speculative reselling of additional cheap options purchased on the edges of the pulls in both directions (in this case, cheap calls were purchased on the pull down, and as many of them as we could sell on the pull up, and what remains was expensed in the money), on the other hand, by speculatively buying more options on the edges (below the calls, above the puts) and taking them in the money at expiration time.
From next week, it's a different game, with nothing to do with options until the next expiry week.
18.10.2011 06:21 #98
donetz
Send message to donetz via ICQ Send message to donetz via Skype™
It is simply not profitable to fly away during the option week. I.e., we are only talking about the option week - the last one before expiry. What happens outside of that week has nothing to do with these pricks. The price of an instrument at the time of expiry should, in theory, minimise the payout. From here on it is as easy as pie...
How does the trading week usually go? We go one way, then the other, and somewhere in between we close. The sense of such movements is simple - increasing profits and decreasing expenses by the time of expiry. The idea that can be theoretically tested is as follows:
Assume that the bigwigs ruling the market are sellers of options (both puts and calls at the same time). These options are bought by hedgers during the life of the option contract (they are the ones who create liquidity in options, which is historically low). To maximize the profit of the hedgers, they must make an effort in the market to close the options at a price that minimizes the total payout on the sum of the calls and puts in the money. And in doing so, you can still make some extra money. You can't manipulate the market for long, but you can in the short run. That's why it's difficult to work in an expirational week, for it is strongly manipulated.
At the entry to the expirational week we calculate the minimum payout point and assume that it won't change during the week because it was accumulated for a long time by hedgers' purchases and there is no reason to pay them more.
Then a pullback in one direction, for example, downwards. Here the fearful hedgers additionally buy higher-priced puts, which will not be exercised, i.e. they will expire without money. This will increase the profit of the options sellers by the amount of premium on these additional puts sold in the expiry week, and in addition, the sellers will buy cheaper calls (speculative buyers in this situation), which will be exercised, i.e., put in the money (i.e., with a strike below the minimum payout to put in the money at expiration time).
After that, a spurt in the opposite direction - selling as much as possible higher-priced calls to hedgers, which were purchased on the downward spurt, the hedgers respectively get into calls, which also will not be executed. You can buy more cheaper puts with a strike higher than the minimum payout point to get in the money at the time of execution.
And the last part is a return to the minimum payout point at the time of expiration, where the hedgers are paid the minimum total amount in the money, and the remaining options, bought by the big guys on the spurt, are expired at a profit.
That's it, the game is done. Expense is minimised, because we are at the point with the minimum payout; income is maximised: on the one hand, through speculative reselling of additional cheap options purchased on the edges of the pulls in both directions (in this case, cheap calls were purchased on the pull down, and as many of them as we could sell on the pull up, and what remains was expensed in the money), on the other hand, by speculatively buying more options on the edges (below the calls, above the puts) and taking them in the money at expiration time.
From next week, it's a different game, with nothing to do with options until the next expiry week.
Oooh, let's go and learn some more.
What exactly didn't like about the question, the name of the asset "currency"?
Definition of an option as a right, without an obligation)
An obligation for the seller (the exchange), but not for the trader.
That's right. Here's the same "point" for the pound at 56)
Do you calculate it yourself, or do you get your statistics from somewhere else?
Here's an interesting software on the subject - ATAS
For the seller (the exchange) it is a duty, but for the trader it is not.
Can't a trader be an option seller?)
Do you calculate it yourself, or do you get your statistics from somewhere else?
Here is an interesting software on this topic http://orderflowtrading.ru/o-programme-atas/
It is an ancient programme, there is nothing in it that is not in Ninza.
Yesterday the euro was being shouted about here, but the thought of buying it lower didn't occur to me...
Better to sell higher:
Can't a trader be an option seller?)
It's an ancient programme, there's nothing in it that's not in Ninza.
The trader can resell the "right", i.e. the product - he does not enforce it - that is the stock exchange's business.
Does Nidza have a footprint type chart?