FTSE100 options

[RogerM]

AC - the cells in the Strategy Evaluation page are all protected. to change the risk free rate, select the Underlying Assets tab at the bottom and you can make the changes in there.

It's really worthwhile going through the online tutorial on Peter Hoadleys web site.

http://www.hoadley.net/options/demos.aspx

 

[Airthrey Capital]

Roger,

Many thanks for your help and quick response...problem sorted!

Now need to go through the tutorial and stop bothering others...

 

[RogerM]

The problem of how to make money by selling FTSE100 index options, and how important it is to understand the effect of IV, is all summarised in the pay-off diagram below. The Blue profile is the 4725 February 2005 straddle priced yesterday at a total of 167 with 70 days to expiry. The Red profile is an ATM straddle based on the prices for the Feb 2003 straddle with 70 days to expiry, which could have been sold for 409. The spread between the breakeven points for the Feb 2003 position was 818 points, whereas now for Feb 2005 it is just 334 points.

Someone PM'd me to ask how the costs of protecting the Feb 2003 straddle would compare with protecting the Feb 2005 straddle. No free lunches - the premium taken from the Feb 2003 was much higher so the costs of underpinning it in the case of large moves against you are correspondingly higher.