Online Broker for trading Currency ETF Options

[Montchik]

Exercising options will be more profitable in this case.

[venumpro]

Exercising options will be more profitable in this case.

Каким образом?

[Montchik]

Ну давайте посмотрим:

Скажем покупаю an SPY 217 (near the money) call with expiration after the next FED meeting (Sept. 20-21) за 3.76 в надежде, что SPY подрастет в цене на $5 или больше before my call expires. Скажем, right after the meeting SPY is $223. То есть:

1. July 28: buy 1 SPY Sep 30 C 217 for $3.76: $3.76 * 100 = $376 + fees (approx $24) = $400
2. Sep 21: exercise call: 217 * 100 = $21,700 + $10(exercise fee) = $21,710
3. Sep 21: Sell shares: 223 * 100 = $22,300 - $5(trade fee) = $22,295
Total: $22,295 - $21,710 - $400 = + $185

Если продавать calls, то
1. July 28: buy 1 SPY Sep 30 C 217 for $3.76/contract : $3.76 * 100 = $376 + fees (approx $24) = $400
2. Sep 21: sell call, assuming underlying market price is 223, my call is 10 ticks in the money, meaning the price would be pretty much the same as current price for SPY July 29 C 212, which is around $4.83: $4:83 * 100 = $483 - $5 (trade fee) = $478
Total: 478 - 400 = + $78

Получается что exercise options выгоднее. Или я что-то напутал?

[venumpro]

If SPY is 223, then 117 call at expiration will be worth $600.

[Montchik]

You mean 217, right?

The July 29 ATM (216.50) strike premium is 0.95. The 10 ticks down (211.50) strike premium is 5.10. In my example it would be: $5.10 * 100 - $5 = $505 - $400 = $105 profit.

Меньше чем если exercise, но зато не надо заморачиваться с exercise calls and trade underlying. Спасибо!

[venumpro]

You mean 217, right?

The July 29 ATM (216.50) strike premium is 0.95. The 10 ticks down (211.50) strike premium is 5.10. In my example it would be: $5.10 * 100 - $5 = $505 - $400 = $105 profit.

Меньше чем если exercise, но зато не надо заморачиваться с exercise calls and trade underlying. Спасибо!

At the expiration, premium will be zero, or few pennies for ATM options. You will be left only with option's intrinsic value, which is stock price at minus strike you bought or sold. Intrinsic value does not decay. Google Intrinsic v. extrinsic value for clarity.

When calculating profit, you should also take into account bid/ask spread. It can be a lot of $$$$. Today, I was trying to sell AMZN calls at the close. I was hitting 2 cents below the bid and still didn't get filied.

[Montchik]

Got it, thank you.