4 ms·

Just to add, a mildly more conservative/higher probability short would be a short call spread, can adjust the strikes depending on your risk tolerance/confidenc

Just to add, a mildly more conservative/higher probability short would be a short call spread, can adjust the strikes depending on your risk tolerance/confidence. This limits upside but you no longer need to outpace theta, it's working in your favor on the sell side. The long put is more sensitive to timing whereas the short call spread limits upside returns. Trade-off depending on your goals. Edit: not to be confused with a short call, which has unlimited downside risk.

smallgovt 8y ago
If one were to pursue this strategy, what's the quickest way to execute it? I called into my brokerage to ask, and they said it will probably be a week from tomorrow. Is there some lag after IPO's before the options market is established?
- shereadsthenews 8y ago
  If you intend to actually delve into options trading you should seriously consider Interactive Brokers.
  - smallgovt 8y ago
    Thanks, is there an advantage to IB other than lower rates and an API?
    - shereadsthenews 8y ago
      No? It's a lot better than calling a broker.
- nickles 8y ago
  > Is there some lag after IPO's before the options market is established? The shortest dated, exchange traded options are weeklies. These expire on Fridays. I'd imagine you won't see volume there until at least Tuesday, though. In order to buy puts, someone needs to write them. Any reasonable seller will be delta hedging their position by shorting the underlying shares. Since equities settle T+2, it won't be easy to short the shares until Tuesday.
- maxxxxx 8y ago
  Also, first understand what you are getting into. I personally have learned the hard way that options are a good way to burn a lot of money very quickly.
- latencyloser 8y ago
  I'm uncertain when the contracts will begin to be listed, but I believe the minimum is 5 days after IPO. Personally, there's quite a few unknowns that would deter me from entering this trade off the bat, as I don't usually trade IPOs. I don't really know what the short pressure on such a stock would be immediately after IPO. Ideally, I'd want an expiry less than 30-45 days away since I'm selling but, I'm uncertain that's enough time for this trade following IPO. I might execute it after seeing what happens at IPO for a few weeks or so. (edit) Of course, that may be far too late. Also, I think it would be a hot stock for people to trade against, so I expect the spread to be reasonable, but the pricing to be extremely aggressive, which means the potential upside may not be enough for me to want the trade. Options are all about timing, sooner may not be better.

smallgovt 8y ago

If one were to pursue this strategy, what's the quickest way to execute it? I called into my brokerage to ask, and they said it will probably be a week from tomorrow. Is there some lag after IPO's before the options market is established?

shereadsthenews 8y ago
If you intend to actually delve into options trading you should seriously consider Interactive Brokers.
- smallgovt 8y ago
  Thanks, is there an advantage to IB other than lower rates and an API?
  - shereadsthenews 8y ago
    No? It's a lot better than calling a broker.
nickles 8y ago
> Is there some lag after IPO's before the options market is established? The shortest dated, exchange traded options are weeklies. These expire on Fridays. I'd imagine you won't see volume there until at least Tuesday, though. In order to buy puts, someone needs to write them. Any reasonable seller will be delta hedging their position by shorting the underlying shares. Since equities settle T+2, it won't be easy to short the shares until Tuesday.
maxxxxx 8y ago
Also, first understand what you are getting into. I personally have learned the hard way that options are a good way to burn a lot of money very quickly.
latencyloser 8y ago
I'm uncertain when the contracts will begin to be listed, but I believe the minimum is 5 days after IPO. Personally, there's quite a few unknowns that would deter me from entering this trade off the bat, as I don't usually trade IPOs. I don't really know what the short pressure on such a stock would be immediately after IPO. Ideally, I'd want an expiry less than 30-45 days away since I'm selling but, I'm uncertain that's enough time for this trade following IPO. I might execute it after seeing what happens at IPO for a few weeks or so. (edit) Of course, that may be far too late. Also, I think it would be a hot stock for people to trade against, so I expect the spread to be reasonable, but the pricing to be extremely aggressive, which means the potential upside may not be enough for me to want the trade. Options are all about timing, sooner may not be better.