>>why have there never been any BCE leaps
Two words: dividends and margin. The dividend factor shouldn't be neglected as a negative to pros calling markets. The prospect of buying calls from the public (or selling puts, as you mentioned), and then being committed to paying dividends for up to two years on the stock you have to short is daunting. Plus, the margin required on Leaps makes it unacceptable from a r/o/e standpoint. For instance, if I buy a two-year Leap for, say, $6.00, I am charged the full $6.00 in margin (assuming it's out-of-the-money). Were it to be a two-year warrant, I would only be charged 50% of the value. Until they can straighten out these anomalies, high-priced Leaps are unattractive from the specialists' point of view. The Exchange constantly lobbies the specialists to list more Leaps, but it's our call. Until they fix the margin, you won't see BCE Leaps.
On the other hand, ABX Leaps have shown some good activity the last while. The main reason is the volatility is only about 80% of 'regular' ABX options. Retail seems to like writing the Leaps, while US arb traders like to buy it. Still not worth the margin needed.
For what it's worth; no investment advice intended.
Happy trading.
Porter |
