Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Canadian Options -- Ignore unavailable to you. Want to Upgrade?

To: Porter Davis who wrote (1391)	5/20/1999 6:24:00 AM
From: thebeach	Read Replies (1) \| Respond to of 1598

Good morning Porter,if the action in a certain equity heats up and the options' premiums go thru the roof how can a trader tell if its legitimate buying or MM's taking advantage of the situation?

To: Porter Davis who wrote (1391)	5/20/1999 8:53:00 AM
From: Daniel Chisholm	Read Replies (1) \| Respond to of 1598

One of the difficulties in calling Leaps markets is the capital treatment they attract. If I buy 100 Leaps for $5, assuming they are out-of-the-money, I am charged 100% margin, or $50,000 for the position. If they were warrants, they would be 50% marginable, so only a $25,000 capital charge, despite the fact that there cannot be a short squeeze on Leaps as often occurs with warrants and rights. (In point of fact, all options are margined this way, but the high time premium associated with Leaps makes the problem much worse from a ROI standpoint). Interesting point about it not being possible for there to be a short squeeze on options. Makes sense, but I never put two and two together to figure that out. But how does the absence of squeezes in options support your argument for similar margin treatment for LEAPS vs. warrants? (It seems to make sense to me to margin out-of-the-money options in a manner similar to OOTM warrants BTW, it's just that I don't see how arguing that a lack of potentially profitable short squeezes ought to suggest lower margin requirements) I can see that you could use the un-squeezable nature of options to argue for more generous margin treatment when you are short OOTM calls, in comparison to being short OOTM warrants. Does this connect (in a margin arbitrage sort of way) back to what margin charge there "ought" to be for buying OOTM calls? - Daniel

To: Porter Davis who wrote (1391)	5/24/1999 8:47:00 PM
From: Roko Bijac	Read Replies (1) \| Respond to of 1598

Thank you Porter, So if I decide to buy June abx call option for example, how should I be asking my broker, can you give me idea? Do I have to mention LEAP or not? I know now Leap is long term, but still. Thanks in advance rb

To: Porter Davis who wrote (1391)	7/21/1999 6:46:00 PM
From: fellowfool	Respond to of 1598

Thanks for responding when I was wondering if anyone was still there. When you say "options are meant to be bought, not sold", could you explain what you mean by this? (I have mostly sold premium due to the time decay factor.) Also, in another post(1393), you refer to your "natural" position. What is this position and how do you maintain it. I would like to learn how a professional, such as yourself, thinks. Actually, do all specialists (right term?) think in these terms or are there differences of opinions? I appreciate whatever response you care to take the time to post. If anyone else has some thoughts along these lines, that's ok too.