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Old 19-06-2016, 11:30 AM
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Default Seek help from professional Option Traders.

I witness Long Future + ATM Put =ATM CALL relating to BEP , Return etc.
But I want to know from my friends... is there any scenario where Synthetic ( 1st one) should be preferred over simple ATM call buying , if so why .
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Old 19-06-2016, 12:21 PM
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Originally Posted by mmca2006 View Post
I witness Long Future + ATM Put =ATM CALL relating to BEP , Return etc.
But I want to know from my friends... is there any scenario where Synthetic ( 1st one) should be preferred over simple ATM call buying , if so why .

Both of ur actions will give profit only if ,market move up.. Assumed that u executed at 8200 strike.

8300 is Break even point above which profit will start below which there is guaranteed loss..

In both cases loss below 8300 is same and profit above 8300 is same..

So it is better to buy only ATM call to justify bullish view as it will require less margin/ amount to execute trade.

Amogh
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Old 19-06-2016, 12:37 PM
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Originally Posted by mmca2006 View Post
I witness Long Future + ATM Put =ATM CALL relating to BEP , Return etc.
But I want to know from my friends... is there any scenario where Synthetic ( 1st one) should be preferred over simple ATM call buying , if so why .

Mostly you would end up with a synthetic call when you first go long on a future or cash underlying and then buy a put for protection. Typically for stocks, you would want to be long in the cash market and not with a future contract.

This becomes useful from a tax perspective if you are holding the security in cash market for the long term, but where you want to be protected from a temporary downturn. The long cash leg can be held for long enough to make it eligible for long term capital gains. Alternatively you could buy puts during times when market goes down to protect you from losses, while you continue holding the stock in your portfolio.

You may also want to hold the stock and not futures to get dividends or bonus shares. While the put leg of the position can be used to insure you against any major down move.

There are many other reasons for holding stock and not the futures contracts. You would go into this kind of a synthetic call in most of those situations.

-- no1lives4ever
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Old 19-06-2016, 02:40 PM
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Originally Posted by no1lives4ever View Post
Mostly you would end up with a synthetic call when you first go long on a future or cash underlying and then buy a put for protection. Typically for stocks, you would want to be long in the cash market and not with a future contract.

This becomes useful from a tax perspective if you are holding the security in cash market for the long term, but where you want to be protected from a temporary downturn. The long cash leg can be held for long enough to make it eligible for long term capital gains. Alternatively you could buy puts during times when market goes down to protect you from losses, while you continue holding the stock in your portfolio.

You may also want to hold the stock and not futures to get dividends or bonus shares. While the put leg of the position can be used to insure you against any major down move.

There are many other reasons for holding stock and not the futures contracts. You would go into this kind of a synthetic call in most of those situations.

-- no1lives4ever

From Amogh post it is clear to select Call option instead of synthetic . Now for bullish case which Call option should I prefer ITM ( facing problem with bid/ask rate difference) or ATM ?
My view is to choose ATM though ITM option act like future ,has better BEP but will face more loss if market goes against me.I prefer to choose ATM option and if market goes positive direction i will sell higher strike call option at later date instead of initiating both legs of a spread at same time.
Please share your views regarding how you all are executing the trades .
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Old 19-06-2016, 02:48 PM
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Originally Posted by mmca2006 View Post
Please share your views regarding how you all are executing the trades .

I am not executing any trades, but I am giving an idea of why you would use a synthetic call option, where you go long the underlying and buy puts

-- no1lives4ever
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Old 19-06-2016, 02:50 PM
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I would like to add that if you are trading options, it is a good idea to learn about the various option greeks and to understand how they work. You would want to check how a greek behaves wrt change in price and how they are affected as you move closer to expiry.

-- no1lives4ever
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Old 19-06-2016, 03:02 PM
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Originally Posted by no1lives4ever View Post
I would like to add that if you are trading options, it is a good idea to learn about the various option greeks and to understand how they work. You would want to check how a greek behaves wrt change in price and how they are affected as you move closer to expiry.

-- no1lives4ever

last 2/3 years I am trading option ( specially spread) , of course greeks are every thing for option trading , but what I felt is that timing of both leg is also very crucial for option trading ,.... want to learn some thing more about leg in / leg out and how to repair a trade.

Last edited by mmca2006; 19-06-2016 at 03:41 PM.
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Old 19-06-2016, 03:30 PM
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Originally Posted by mmca2006 View Post
...... how to repair a trade.

IMHO, there are no such real thing which exist that we can call "repair"
The moment we think we are "repairing" is nothing but the deviating and hence modifying original construct of option synthetic/combo. So its effect is not actually "repairing" , rather it is indirectly accepting the loss and starting the new thing to cover that loss. But we are taught not to accept loss, so option gurus which never fail invented the word "Repairing"

Now in purest form and to be as a honest option player these basic construct i visualize and if i trade any one of these and once market deviate ( and it will 99% of time ) from context of these construct then as a honest option player i must accept that and close the trade accepting any PnL acquired till that time.

1) Instrument is not likely to move substantially
2) Instrument is likely to move substantially
3) Instrument is likely to go up substantially
4) Instrument is likely to go down substantially
5) Instrument's volatility is likely to remain subdued
6) Instrument's volatility is likely to decrease substantially/marginally
7) Instrument's volatility is likely to increase substantially

So if i pick a possible scenario that is likely to happen and start a option trade aiming for that, then i should exit as soon as i realize the instrument is deviating from chosen scenario.
But will trader be so honest, frankly not , because they have been screwed with repaired technology.
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Old 19-06-2016, 03:41 PM
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Originally Posted by devdas View Post
IMHO, there are no such real thing which exist that we can call "repair"
The moment we think we are "repairing" is nothing but the deviating and hence modifying original construct of option synthetic/combo. So its effect is not actually "repairing" , rather it is indirectly accepting the loss and starting the new thing to cover that loss. But we are taught not to accept loss, so option gurus which never fail invented the word "Repairing"

Now in purest form and to be as a honest option player these basic construct i visualize and if i trade any one of these and once market deviate ( and it will 99% of time ) from context of these construct then as a honest option player i must accept that and close the trade accepting any PnL acquired till that time.

1) Instrument is not likely to move substantially
2) Instrument is likely to move substantially
3) Instrument is likely to go up substantially
4) Instrument is likely to go down substantially
5) Instrument's volatility is likely to remain subdued
6) Instrument's volatility is likely to decrease substantially/marginally
7) Instrument's volatility is likely to increase substantially

So if i pick a possible scenario that is likely to happen and start a option trade aiming for that, then i should exit as soon as i realize the instrument is deviating from chosen scenario.
But will trader be so honest, frankly not , because they have been screwed with repaired technology.

Hmm.... "Bad Man"...I got it , there is no need to repair ... just to take the loss and wait for new trade...
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Old 19-06-2016, 05:22 PM
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Originally Posted by mmca2006 View Post
From Amogh post it is clear to select Call option instead of synthetic . Now for bullish case which Call option should I prefer ITM ( facing problem with bid/ask rate difference) or ATM ?
My view is to choose ATM though ITM option act like future ,has better BEP but will face more loss if market goes against me.I prefer to choose ATM option and if market goes positive direction i will sell higher strike call option at later date instead of initiating both legs of a spread at same time.
Please share your views regarding how you all are executing the trades .

mmca2006 Suppose u are executing when market is at 8200 level.

Then 8200 Call becomes as ATM option and 8100 CE or lower strikes become ITM options..

If i am bullish then i will go with buying ITM option ie 8100 CE as it has more intrinsic value than that of 8200 CE.. Then if market goes up u can protect profit by selling higher strike CE option at later date..

Then strategy become complex. Then u have to work out what is BEP

Amogh
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