N Rothschild
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Hey could someone give me a brief how to on the ig index options? finding it a bit confusing..im not that clued up on options..:smart:
IG Index options
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N Rothschild
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standard options, sick of being shaken out of the market on its way to my targets so want to just buy options for when it reaches a particular level, just find the ig index a bit complicated with the high/low strikes
If you are not clued up, don't touch it. Basically you have the same thing as Index options but with SB.
There are PUTS and CALLS with expiry dates (DEC, JAN, FEB). And either in, out and at the money. Note the expiry date is the third Friday in the month so varies from month to month. You need to know how the partcular option will move relative to it's underlying index. I think this is the Delta. So if the index moves 100 points your out of the money option might move 20 points. Take for example the FTSE 5000 Jan09 CALL.
The price is 17 to sell and 23 to buy. So if you buy £1 a point, every point movement is £1 gain or loss. Actually it is minimum £2 a point. The deposit required is £200. If you are buying an option then as the time goes by to expiry the option will gradually lose value. If it is still out of the money at expiry it will be priced at zero. Although the offer price should also be zero at expiry it doesn't actually go below 4. This time decay is on your side if you are writing options as you want them to go to zero to maximise profits.
N Rothschild
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give you a for instance, dow opened at 8240ish, my target was 8500 how ever i got stopped out a few times then managed to catch some of the move to 8500 resulting in a small amount of profit. i want to be able to buy options with a strike of 8500 so i would have benefited from the entire move. which options should i have bought in this scenario?
Here's one suggested approach in these volatile times. Buy the cheapest, most out of the money options you can find on both sides of your market, eg buy 3300 ftse puts and buy 5000 ftse calls. Don't spend more than about £10 an option and don't commit much of your bank. If you have at least a month to go you could get a nice surprise, as we are constantly entering uncharted territory. I bought an £8 option which I sold for £250 in early November after some huge move in the underlying.
Don't write (ie sell) options except to close out a position, as this has limited upside and unlimited downside (the reverse of buying an option)
Don't write (ie sell) options except to close out a position, as this has limited upside and unlimited downside (the reverse of buying an option)
N Rothschild
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ok think ive worked it out, your spread betting the value of the option? not really what im looking for i dont think
Hoggums
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I trade ig index options but wouldn't look at touching daily or barrier bets as they are far too expensive in my opinion.
What I tend to do is hedge out any position with an out of the money option so if my trade goes awry I can take the profit on the option and leave the existing trade open with another out of the money option if I believe the market is going to reverse back in my direction.
E.g. If I believe the market is going south - currently at 4100. Let's say I want a stop at 4140, I could make that a hard stop and if the market hits 4140 I lose 40 points.
Alternative I could purchase a daily call option at 4140 which would be about 8-10 points. This would give me an effective stop at 4150, but I can hold the position until close to wait for a reverse.
e.g. If the FTSE moves up to 4240 then starts to reverse I could close my option for 90 points profit and buy another option at 4260 for 8-10 points. If the market then goes back to my entry at 4100 I can close the short trade for no profit and leave the existing option at 4260 open - it's value will be zero at this point - so there's no point closing it - if the market goes up later in the day I can sell it for greater than zero.
There total profit on this trade will be 80 pips if I assume the second option expires worthless.
Obviously this is a hypothetical example and relies on some good timing - but it shows how to make a profit even if you guess your trade the wrong way.
What I tend to do is hedge out any position with an out of the money option so if my trade goes awry I can take the profit on the option and leave the existing trade open with another out of the money option if I believe the market is going to reverse back in my direction.
E.g. If I believe the market is going south - currently at 4100. Let's say I want a stop at 4140, I could make that a hard stop and if the market hits 4140 I lose 40 points.
Alternative I could purchase a daily call option at 4140 which would be about 8-10 points. This would give me an effective stop at 4150, but I can hold the position until close to wait for a reverse.
e.g. If the FTSE moves up to 4240 then starts to reverse I could close my option for 90 points profit and buy another option at 4260 for 8-10 points. If the market then goes back to my entry at 4100 I can close the short trade for no profit and leave the existing option at 4260 open - it's value will be zero at this point - so there's no point closing it - if the market goes up later in the day I can sell it for greater than zero.
There total profit on this trade will be 80 pips if I assume the second option expires worthless.
Obviously this is a hypothetical example and relies on some good timing - but it shows how to make a profit even if you guess your trade the wrong way.
It is just a bet on the movement of the option. Now the options move relative to the underlying index but in different ratios according to, amongst other things, strike and time value. This correlation is called the Delta. An in the money call option with a reasonable time value (JAN) will have a Delta of about 0.3 which means for every 100 point move of the index the option will move only 30 points. As the option approaches expiry the Delta ends up at 1, which means for every 100 points movement in the index the option moves 100 points as well. Obviously volatility comes into the equation as well. IG don't show the Deltas but City Index do, so best to open an account there. Why not just spread bet the index future? (point for point)
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tar
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the same situition with me ,most of the time i get stopped then the market goes in my direction so i decided to switch to index options at IG ... but maybe monthly options not daily options
glasshopper
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i posted this elsewhere but it could go here too
I woukdn't go anywhere near ANY of IG Indexes daily options or for that matter, any of their option products. They are all a complete rip off.
ANY OF THEM
including their binaries, ladder, or dailies which they promote very hard and if you trade them you will see why.
The reason, well they have options traders who hve to settle their book at any given moment. Since CBOE don't offer one day options IG index are the counter party and thus have direct exposure to risk. If the market moves against them comapred to what their book looks like, they will deliberatly 'fix' the price of the option so that they are back in the mney themselves.
so if you are trading with them and they are on the other side of a winning bet they will changr the price of the option with no attention to the underlying market even though they are are also the market makers as all of their indexes are not strictly the same. For example, CBOE S&P500 index which has the ticker SPX is called US SPX 500 - not the same thing.
Back to the options. You will be trading the option one minute in the money, the next, someone on their options desk will be in a unprofitable position and mark down the option 20%, 30%, 40% 50%. Anything they feel basically against the market you are trading and due to the decay on this instrument, which is the worst there is of any option trading day, you will likely end up expiring them worthless.
You have been warned
I woukdn't go anywhere near ANY of IG Indexes daily options or for that matter, any of their option products. They are all a complete rip off.
ANY OF THEM
including their binaries, ladder, or dailies which they promote very hard and if you trade them you will see why.
The reason, well they have options traders who hve to settle their book at any given moment. Since CBOE don't offer one day options IG index are the counter party and thus have direct exposure to risk. If the market moves against them comapred to what their book looks like, they will deliberatly 'fix' the price of the option so that they are back in the mney themselves.
so if you are trading with them and they are on the other side of a winning bet they will changr the price of the option with no attention to the underlying market even though they are are also the market makers as all of their indexes are not strictly the same. For example, CBOE S&P500 index which has the ticker SPX is called US SPX 500 - not the same thing.
Back to the options. You will be trading the option one minute in the money, the next, someone on their options desk will be in a unprofitable position and mark down the option 20%, 30%, 40% 50%. Anything they feel basically against the market you are trading and due to the decay on this instrument, which is the worst there is of any option trading day, you will likely end up expiring them worthless.
You have been warned
