Comments for Trade Naked

Comment on 1080 is Critical by gyinnon

gyinnon — Fri, 20 Nov 2009 22:12:27 +0000

GOOG options are very liquid, you won’t have trouble closing out your position.

Comment on 1080 is Critical by Chuck

Chuck — Fri, 20 Nov 2009 20:09:10 +0000

GOOG does it again, has been 570 +/- .50 since 9:40AM and it’s 570.05 at 3PM. I like put or call butterflys in these cases, and a 560/570/580 Call Butterfly put on around 10:30 appreciated by 10% today, just closed out )

I’m relatively newbish, and wonder how easy / hard it is to close out ITM positions in the last half hour of trading if I’d waited longer?

Comment on How Not to Capture Dividends by forex robot

forex robot — Thu, 19 Nov 2009 21:02:46 +0000

Great post this will really help me.

Comment on How Not to Capture Dividends by gyinnon

gyinnon — Thu, 19 Nov 2009 17:26:55 +0000

Yes, Vance, that is why it wasn’t a well thought out trade. The calls would have been exercised had the stock stayed where it started. Since I put on the trade with no time value in the calls, I would have made nothing. As you say, after the ex date, the stock drops and the calls stay where they are, so the implied volatility increases.

Comment on How Not to Capture Dividends by VanceH-

VanceH- — Wed, 18 Nov 2009 13:38:44 +0000

Hi Gil, I’m assuming you thought your original calls would be assigned before ex-dividend? It is surprising that they weren’t, given they had no time value at the time–although they did have 3 more weeks to run. I assume the IV jumped way up after the ex date.

Comment on Dividend Capture Correlation with SPX by mktmkr

mktmkr — Sun, 15 Nov 2009 12:06:59 +0000

Have you looked at FAV, which is a CEF that does dividend capture? http://seekingalpha.com/symbol/fav It seems to be quite correlated with SPY.

Comment on Dividend Capture with Clorox by gyinnon

gyinnon — Wed, 28 Oct 2009 15:47:20 +0000

You’re right that it doesn’t make sense to lose 50 cents of time premium to get 50 cents of dividend and the drop in stock price that comes with ex dividend days.

This is what the situation was Friday near the close. CLX closed at 59.14 and the Nov 55 C was 3.7 bid 4.4 ask. So an owner of the call, if he sold at the bid, would get 3.7, less than what the intrinsic value should be, 4.14. If he could sell at the mid-point, he would get 4.05, still less than intrinsic value.

On the other hand, if he exercised, he pays 55 for a 59.14 stock and takes the risk that something happens over the weekend. Monday was the ex- dividend day, so he sells his stock on Monday near the open. The stock drops due to the dividend, but less than the dividend amount.

Comment on Dividend Capture with Clorox by Mark Wolfinger

Mark Wolfinger — Mon, 26 Oct 2009 21:06:49 +0000

Why would you have expected to be assigned an exercise notice?
Using what criteria?

I cannot see yesterday’s closing markets for the options, but the Nov 55 call had about 50 cents of time premium in it. The owner could have exercised, sacrificed that 50 cent time premium and collected a dividend of 50 cents. Who is his/her right mind would do that.

The exerciser would get all the downside risk, have to pay carry costs through expiration – and what is there to gain? ZERO.

Comment on Dividend Arbitrage with Transdigm by gyinnon

gyinnon — Wed, 14 Oct 2009 01:09:24 +0000

I think that I have changed settings so that you will not have to fill out the CAPTCHA. We’ll see if it worked.

Comment on Put Mispriced? by gyinnon

gyinnon — Wed, 14 Oct 2009 00:43:29 +0000

I realized this only later. I was embedded in one way of thinking about the trade. It is always valuable to look at the equivalent transformed trade to really understand what is going on.