Sep 28, 2015
The Buzz: Final days for comment letter on DOL IRA proposal.
Office Hours: So many questions.
- Question from TLand66 -I would like to submit a question for the Advisors Option radio program. I have reviewed a wide variety of options products for my clients. Aside from large widely held products like SPY and QQQ, there seems to be a surprising lack of liquidity in many of the products that I research. Spreads are wide and size is relatively limited - particularly in my preferred time frame of 2-3 months. My strategy is 4-5% OTM covered calls. I do not want a substantial amount of size. 200-300 contracts will typically suffice for the needs of my clients. Still this seems to dramatically outstrip the available bid in most calls by several orders of magnitude. I have to sell through the bid, sometimes by a substantial margin, to complete my transaction costing my clients substantial amounts in slippage. After all a $.10 hit on 300 contracts amounts to $3000. If I do that on every trade it adds up fairly quickly. Do you have any tips that will help me find more liquidity or help me improve my execution on behalf of my clients? I find your program tremendously informative. I particularly enjoyed the episodes on the VIX and income trading. Although I found your most recent episode discussing the issues with IRAs to be extremely alarming. I am drafting my comments on the proposal as we speak.
- Comment from Steve A - With respect to the OIC study on various options strategies since 2003 - Are you really surprised the highest return was gained by a synthetic short put stupid in what has mostly been a bull market? (Covered strangle => short call + long stock = ITM short put, plus OTM short put). So, yes! Selling 2 puts brings in more money than selling only 1! Yes, the lobster and meatball have taught me enough to figure this out and they should feel good that something has stuck. Keep the great shows coming - Hawkeye
- Question from NewBQuestion - How does premium selling work when selling options - Do I get the capital right away? How does that work from a margin perspective?
- Comment from VoxPopuli - Great program. I have shared it with a number of my colleagues because I agree that more fund managers and advisors should use options. You would be surprised how many of those guys still look at me like I am crazy when I tell them to buy a put - they prefer to save the money and rely on stops. Hopefully last month finally put that thought process to bed. What good is a stop order when the market opens down 1000 points? Seems like these are great times to be a proponent of options. Guys like Randy must have their phone ringing off the hook from people who have "seen the light."
- Question from Alan K - I have heard discussion in several outlets post 8/24 that options can exacerbate market volatility, particularly at the beginning and end of the session. Is this true? Do you agree with this assessment?
- Question from Mousin - Monday market move was difficult to believe. Could it be that the huge options portfolios held by macro hedge funds are to blame for big move Monday in the market? Does this phenomenon also exhibit itself around options expiration?
- Question from Vivian: I came across this article recently and immediately thought of your program. Do you feel this information is accurate? If so how should someone treat options that are deeply in-the-money? Are there any guidelines for when they should be exercised or how they should be treated in a portfolio?
- Question from KDiddy - Hi Mark, I love your shows! Question: what happens to my options if the underlying gets halted permanently? Would I ever be able to close them? I am remembering Sino Forest from a few years ago in Canada- stock got halted pending a fraud investigation and never came back. I am worried that I will not be able to cash in on my BABA puts! Thanks.