tag:blogger.com,1999:blog-600798209403025527.post1239781678153390935..comments2023-04-29T14:59:44.858+01:00Comments on Sigma Options: What You Didn't Know About Time DecayUnknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-600798209403025527.post-40204951923484028252007-11-19T19:09:00.000+00:002007-11-19T19:09:00.000+00:00I agree that the leveling off at the end of life a...I agree that the leveling off at the end of life appears to argue against holding option shorts to the bitter end. But your OTM graph also shows that the time to halve (half-life?) is much longer at the left side of your graph - going from 1600 to 800 takes six knots, while the halving from 800 to 400 takes just 3 knots, going from 400 to 200 takes just 2 knots, and going from 200 to 100 takes just one knot. So realizing 50% of the margin you've tied up on your short takes much less time (1/6th) at the end of life, despite the apparent slowdown.Gregory Bloomhttps://www.blogger.com/profile/07114478285253008346noreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-56882287518581533662007-03-27T20:35:00.000+01:002007-03-27T20:35:00.000+01:00Dollar falls in the time value of options being gr...Dollar falls in the time value of options being greatest for ATMs does not lead me to the conclusion you came to. Returns on the option's values is still greatest for away-from-money options as they near expiry. I've written something here (<A HREF="http://vafrous.com" REL="nofollow">vafrous.com</A>), and threw in a couple of graphs.Unknownhttps://www.blogger.com/profile/10392336566709606190noreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-73931214874005629462007-03-10T19:58:00.000+00:002007-03-10T19:58:00.000+00:00"Which futures markets in your experience seem to ..."Which futures markets in your experience seem to be the most cost-effective with option writing?"<BR/><BR/>To be honest, the only FUTURES options I have played extensively with are the incices, where, as you have noticed, spreads are quite good.<BR/><BR/>I have a friend who does a lot of commodity options, so when I catch up next I will interrogate him on the topic. It so happens I am looking into this myself so stay tuned.<BR/><BR/>Re time frame: Depending on IV and how far OTM you actually go can make a difference. I wouldn't "automatically" look at any expiry range. Do the sums in each situation to get the best deal.<BR/><BR/>Good luckWaynehttps://www.blogger.com/profile/14956625376991346003noreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-14964983895949414242007-03-10T19:34:00.000+00:002007-03-10T19:34:00.000+00:00Correction to previous comment:For a sale at 45 da...Correction to previous comment:<BR/><BR/>For a sale at 45 days, $600-$800 debit is the targeted amount for an OTM strangle.<BR/><BR/>For a sale at 90 days, a significantly higher debit, perhaps $1000-$1300 is the target.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-90694700181973521892007-03-10T19:11:00.000+00:002007-03-10T19:11:00.000+00:00As the first commenter above and a newbie to futur...As the first commenter above and a newbie to futures options trading at that, from all my reading I concluded that the best way for me to profit is to write OTM strangles and I like the idea of the 90 to 30 day window or the 45 to 10 day window, with the debit for each strangle being worth between $600-$800. One concern I have is that in real life, I worry I'm giving up too much profit for the risk I'm taking with commissions and spreads. <BR/><BR/>My worst experiences with spreads have been with the currency options, with the grain options being somewhat bad. Coffee, cocoa, and crude oil seem fine. E-mini S&P500 is great.<BR/><BR/>Which futures markets in your experience seem to be the most cost-effective with option writing?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-10187647479551985312007-03-08T01:43:00.000+00:002007-03-08T01:43:00.000+00:00i write future options(er2) 45 days/buy back at 10...i write future options(er2) 45 days/buy back at 10 days. usually in a spread set up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-54779140102889903292007-03-06T13:51:00.000+00:002007-03-06T13:51:00.000+00:00It is simply a matter of plotting the extrinsic va...It is simply a matter of plotting the extrinsic value remaining at various times till expiry using an options pricing model.<BR/><BR/>To this simple test. Pick an OTM option with 30 days remaining, compare the price with one 60-90 days remaining. Depending on how far OTM you go, IV, skew, etc There may be more premium per day on the longer dated options.Waynehttps://www.blogger.com/profile/14956625376991346003noreply@blogger.comtag:blogger.com,1999:blog-600798209403025527.post-65855952470817906892007-03-05T23:38:00.000+00:002007-03-05T23:38:00.000+00:00As someone interested in doing out of the money op...As someone interested in doing out of the money option writing on futures contracts, I find it fascinating that I should be in the -90 to -30 day window. May I ask how you came up with this graph showing theta decelerating in the last 30 days?Anonymousnoreply@blogger.com