User 115548

An Options Trade on GM's Volatility

In theory the strategy is 100% correct. It is called a Box spread. However the author mentioned Risk Free which is not the case. The risk in this trade is in the execution. The trade has too parts:

The Call Spread and the Put spread.

Both trades has to be executed simultaneously. If one spread is executed at a certain price there will be no guarantee that the other order will be executed. Hence you need to do a market order on the spread that is not executed which can shave about 5 cents from the credit.

Also the size of the order is important because it will affect Implied Volatility. There is no way you can execute such an order with size unless the trades are done at the market which can distort the price of the spread and there will be no guarantee of the amount of credit received on either order.

I have to disagree with the author about the 22% because if we account for the trade execution risk plus the commission, the return will be much lower. Having said that, A box strategy should pay the Risk free rate of return

Intuitive Surgical: Even Great Companies Hit Valuation Peaks

I guess you got it right. I hope you are short

Intuitive Surgical: Even Great Companies Hit Valuation Peaks

I guess you got it right. I hope you are short