Geoff Considine

Opportunities in Options Markets, Summer 2009

John:

Thanks for the comments. Obviously one can sell puts vs. selling covered calls--one is just the synthetic of the other. The issue comes down to how confident you are in future volatility--the cost of rolling the strategy forward through time.

I agree that Bodie's strategy is far more conservative than what I am proposing.

I have been focusing on selling long-dated options--like what I use in my examples.

Geoff



On Jul 02 02:46 AM ikkyu wrote:

> Greetings Geoff,
>
> Nice to see the evolution of your thoughts about monte-carlo and
> options pricing. I think this is the most interesting stuff you have
> done to date.
>
> Please let me ask a few questions, if you don't mind.
>
> Not sure why underpriced options would suggest buying calls rather
> than buying puts (or more reasonably straddles) in the short run
> (<3 years). Serial correlation can be positive with a negative price
> trend, can it not?
>
> Also, are you talking about buying OTM calls on EBAY? While stock
> markets tend to go produce positive results over long periods, you
> have to have to inherently predict the magnitude of the move when
> buying options.
>
> Which options are you talking about selling? The long dated LEAPs
> or the front month? You would have interest rate risk on the LEAP,
> far lower gamma initially, and wider bid-ask spreads. I usually divide
> the time value by the number of days till expiry to get a better
> idea of the decay per day.
>
> Also, why sell covered calls at all? Naked puts would be the risk
> equivalent and would simplify things. If you get exercised, you could
> then start selling calls on the underlying.
>
> While i like your plan, it is clearly not an equivalent for Bodie's
> conservative methods. Bodie's plan seems like it would work better
> with a call spreads. It would be like your own index annuity. <br/>
>
> Just some thought. Nice piece of work. Seems like you are definitely
> thinking out of the box.
>
> Cheers from Osaka,
> john
>

Opportunities in Options Markets, Summer 2009

This is just using QPP's projected volatilities for each ticker and the rest of the tabel is other data. Or did I miss your question?


On Jul 02 02:54 PM gasem wrote:

> How do you use QPP to generate the above table?
>
> thanks

The Cost of Volatility To Your Portfolio

Hmm--look at the VIX chart comapred to what happened. Perhaps history does repeat itself.

The Cost of Volatility To Your Portfolio

While I know that the similarity of VIX path and that from the mide 1990's shown above is qualitative, it sure does look like the qualitative comparison continues to be applicable:

finance.yahoo.com/q/bc...;t=my

Investing In a Greenhouse Gas-Regulated World

Jeffrey Lin has just written a related article on energy efficiency:

energy.seekingalpha.co...

This is a good article.

The Cost of Volatility To Your Portfolio

With regard to Al Capital's comments:

VIX is the implied volatility in current prices of near-term options. This means that VIX is the level of volaility that people are paying for in the near term. We may think of this as tending to be the more sophisticated money--maybe. VIX tracks realized volatility (actual trailing volatility of returns) very well---not perfectly, but closely. In other words VIX and real short-term volatility track each other very well---RiskMetrics has documented this extensively.

Investing In a Greenhouse Gas-Regulated World

Honeywell is promoting its activities in Climate change mitigation:

biz.yahoo.com/prnews/0...

Investing In a Greenhouse Gas-Regulated World

Consider this article on AA as an 'ethical company'---

biz.yahoo.com/bw/07051...

Investing In a Greenhouse Gas-Regulated World

More companies signing on support GHG regulation:

GM has signed on, believe it or not, in calling for regulation of GHG's:

biz.yahoo.com/ap/07050...

Citigroup has just announced a $50 billion initiative:

www.marketwatch.com/ne...;dist=TQP_Mod_mktwN

Investing In a Greenhouse Gas-Regulated World

Germany has just announced plans to make major reductions in GHG's by 2020:

www.environmental-fina...