Posts Tagged ‘out of the money

18
Jun
11

Finanzas 101: FX risk reversal

Debido al aumento de volatilidad en el Forex, un concepto interesante para aprender es el Risk Reversal.

(…) This indicator represents a proxy for investor concerns that (currency) will collapse suddenly, and its high level suggests that this is indeed a growing concern. (…)

Según Investopedia

In foreign-exchange trading, risk reversal is the difference in volatility (delta) between similar call and put options, which conveys market information used to make trading decisions.

Para Sala de Inversiones

Muestra la diferencia en volatilidad, y por tanto en precio, entre las puts y las calls sobre las opciones out of the money más liquidas cotizadas en el mercado al contado. Los valores positivos indican que las calls son más caras que las puts (la protección al alza en el subyacente spot es relativamente más cara), mientras que los valores negativos indican que las puts son más caras que las calls (la protección a la baja en el subjacente spot es más cara). Los cambios significativos pueden indicar un cambio en las expectativas de mercado para la dirección futura del tipo de cambio de divisas subyacente spot.

Conforme a Global Market Financial Institute,

The market has established a 25 (0.25) delta benchmark for risk reversal quotes.

Listo con las definiciones básicas, ahora el DB tiene una muy buena guía-del 2006- para sacarle provecho al tema. 

 

 

 

06
Oct
10

Finanzas 101: El “Encanto” de una Opcion

Condor Options tiene un breve e ilustrado post sobre el delta decay. Así mismo menciona libros como el de McMillan y el de Natenberg.

But even the Natenberg book (and, if I remember correctly, McMillan) don’t discuss the difference between the deltas of options with identical strike prices but different expirations. As expiration approaches, the delta of in-the-money options approaches one, while the delta of out-of-the-money options approaches zero. Known also as “charm,” delta decay is a second-order Greek that measures the rate of change of delta per day.

30
Sep
10

critica al hedging convencional

Condor Options tiene un post donde explica los problemas del hedging clasico, tomando como ejemplos a la diversificación y al seguro de portfolio (put y collars).

Portfolio insurance strategies were developed in the late 1970s and early 1980s to provide institutional investors with a guaranteed return and reduced uncertainty, and coincided with the creation of options exchanges. See Bouyé 2009 for an overview of the history and types of portfolio insurance. I’ve tested three such strategies here:

  1. Long ATM 1-year puts: Given a starting $500,000 portfolio allocated to the SPDR S&P 500 ETF (SPY), buy at-the-money (ATM) put options expiring in one year and hold through expiration. Rebalance the SPY shares after expiration to account for any realized gains or losses, and re-hedge.
  2. Long 10% OTM puts: Given a starting $500,000 portfolio allocated to the SPDR S&P 500 ETF (SPY), buy 3-month put options with a strike price 10% below the current SPY price and hold through expiration. Rebalance the SPY shares after expiration to account for any realized gains or losses, and re-hedge.
  3. Zero-cost collars: Given a starting $500,000 portfolio allocated to the SPDR S&P 500 ETF (SPY), buy 3-month zero-cost collars with a long put strike price 10% below the current SPY price and a short call strike price set at the highest level that brings in sufficient credit to offset the price of the put. Hold through expiration. Rebalance the SPY shares after expiration to account for any realized gains or losses, and re-hedge.

22
Apr
10

Paper: Temores y Riesgos

Tails, Fears and Risk Premia

Abstract:
We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof we identify and estimate a new Investor Fears index. The index suggests both large and time-varying compensations for fears of disasters. Our empirical investigations are essentially model-free, involving new extreme value theory approximations and high-frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out-of-the money options and new model-free implied variation measures for estimating the corresponding risk neutral expectations.

Link al Paper

03
Feb
10

Opciones: mirar los detalles

Eso es lo que recomienda Mark Wolfinger en un postde su blog Options for Rookies– cuando responde las inquietudes de un lector.

I am always surprised when someone comes to me with this (or similar) question.  No one in his/her right mind would EVER – under ANY REASONABLE CIRCUMSTANCES – exercise an option when it ‘reaches it’s strike price. I just cannot comprehend from whence that idea originates.  I would be extremely appreciative if you can provide a clue. Just look at any stock and the options on that stock.  Notice that there are in-the-money calls and puts. Notice that the open interest of these options is not anywhere near zero.  Zero would be the open interest if everyone exercised those options.

(…) Do you see that the slightly ITM calls and puts carry a time premium in addition to intrinsic value?  Anyone who owns that option and no longer wants to own it – would SELL and collect the full option premium.  Exercising allows the capture of only the intrinsic value and the time value is tossed into the trash.  No one would do that.




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"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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