Option Spreads, Credit my Debit Message Board

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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: jjs_ynot who wrote (1618)	8/28/2000 9:53:06 AM
From: KFE	Read Replies (1) of 2317

Dave, How big an effect is this? 10 percent or 100 percent? No absolute number, it varies but is not a large number. The important thing to remember is that it exists and to adjust your decisions accordingly. There are also time differences in the implied skew which can be adjusted for but should really only apply to professional trading. I have read the article you linked and it enforces some points discussed previously. Although not quite in his 50s, Riley has suffered two heart attacks, one of which also involved a mild stroke, and has been carried off the trading floor on a stretcher on two occasions. Put a stethoscope to his chest and you’ll hear the steady tick of a pacemaker. This is the reason why I devote less time to trading these days. Remember live while your alive. Long Gamma: Riley explains that other things being equal, he likes trading from a long gamma, short vega position when possible. This is the normal strategy for market makers and dispels the misnomer that options professional are always short options. LEAPS: Market makers don't like to take positions in them and find them difficult to price. Bad Fills: A few hours later, this trade will come back to haunt Riley when a floor official comes by to query his fill. At the time Riley bought these options at $6, the Pacific Coast Exchange was apparently showing a 6 1/8 bid and the upstairs customer wants a fill no worse than 6 1/8th. Riley will protest a bit, but eventually agrees to adjust the fill to the higher level. In his haste, he may have missed checking the bid-offered prices of the other exchanges. This enforces the importance of checking all the regional exchanges before entering your order and filing a complaint if you think that the execution was not the best. You may not always get an adjustment but sometimes you will. Competition: To make matters more difficult, the broker announces that his customer is also checking the market for these options “away” at the Chicago Board Options Exchange. New competition such as the ISE should should improve the markets for the retail investor. Remember that on the Amex he is the specialist and the order book official and can trade for his own account. The PHLX is the same way. If things have not changed the CBOE and Pacific have a market maker based system and the order book official cannot trade for this own account. IMO a better system. Regards, Ken

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