Gamma Trade Options With John Netto (Interactive Brokers)

April 8, 2023April 8, 2023 WWW.OSOKTRADING.COMWWW.OSOKTRADING.COM

Gamma Trade Options Gamma Trade Options With John NettoWith John Netto

John Netto John Netto Chief Investment StrategistChief Investment Strategist

NetBlack Capital, LLCNetBlack Capital, LLCCommodity Trading AdvisorCommodity Trading Advisor


DisclaimerDisclaimerAll of the foregoing is commentary for informational All of the foregoing is commentary for informational purposes only. All statements and expressions are the purposes only. All statements and expressions are the opinion of John Netto and are not meant to be a opinion of John Netto and are not meant to be a solicitation or recommendation to buy, sell, or hold solicitation or recommendation to buy, sell, or hold securities. The information presented herein and on our securities. The information presented herein and on our related web site has been obtained from sources related web site has been obtained from sources believed to be reliable, but its accuracy is not believed to be reliable, but its accuracy is not guaranteed. Estimates, assumptionsguaranteed. Estimates, assumptions

and other forward-looking information are subject to the and other forward-looking information are subject to the limits of forecasting. Actual future developments may limits of forecasting. Actual future developments may differ materially due to many factors. Futures and differ materially due to many factors. Futures and options trading involves substantial risk and is only options trading involves substantial risk and is only appropriate for those who have risk capital to trade.appropriate for those who have risk capital to trade.


BackgroundBackground

President of One Shot – One Kill President of One Shot – One Kill Trading, LLCTrading, LLCAuthor of “One Shot – One Kill Author of “One Shot – One Kill Trading” (McGraw-Hill, 2004)Trading” (McGraw-Hill, 2004)Chief Investment Strategist Chief Investment Strategist NetBlack Capital, LLCNetBlack Capital, LLC


Questions for the classQuestions for the class

How many people currently trade How many people currently trade options on stocks?options on stocks?

How many people currently trade How many people currently trade options on futures?options on futures?


Class objective:Class objective:

Provide an introduction to the Provide an introduction to the concepts and strategies of concepts and strategies of options trading.options trading.

Understand the components and Understand the components and nomenclature that makeup of nomenclature that makeup of options futuresoptions futures


Outline of PresentationOutline of Presentation Basic Option ComponentsBasic Option Components Background of the GreeksBackground of the Greeks Using Options Software TWSUsing Options Software TWS Mindset When Placing an Options Mindset When Placing an Options

TradeTrade Review of Major Market Options Review of Major Market Options

Prices and Possible StrategiesPrices and Possible Strategies


Options Trading: The ConceptOptions Trading: The Concept

The process of defining the risk The process of defining the risk metrics behind one’s exposure to the metrics behind one’s exposure to the market.market.

Performed through the purchase or Performed through the purchase or sale of a call, put, or combination sale of a call, put, or combination thereof, using the same or different thereof, using the same or different strike prices and datesstrike prices and dates


Options Trading: The BenefitsOptions Trading: The Benefits

Compartmentalization of riskCompartmentalization of risk Ability to withstand/potential to profit Ability to withstand/potential to profit

from larger than anticipated from larger than anticipated variancesvariances

Maintain dynamic trading nature Maintain dynamic trading nature irrespective of underlying movement irrespective of underlying movement


Basic Option ComponentsBasic Option Components

CallsCalls PutsPuts Strike PriceStrike Price Implied VolatilityImplied Volatility Expiration Month Expiration Month Intrinsic ValueIntrinsic Value Tick ValueTick Value



CallsCalls– Gives the buyer the right, but not the Gives the buyer the right, but not the

obligation to purchase on or by a certain obligation to purchase on or by a certain date at a specified pricedate at a specified price

– Long a call is a bullish positionLong a call is a bullish position– Short a call is a bearish positionShort a call is a bearish position– Long a 110 February Yen Globex Call Long a 110 February Yen Globex Call

gives me the right to purchase Yen gives me the right to purchase Yen Futures at 110 on or before Feb 6Futures at 110 on or before Feb 6




PutsPuts– Gives the buyer the right, but not the Gives the buyer the right, but not the

obligation, to sell the underlying by a obligation, to sell the underlying by a certain date at a specified pricecertain date at a specified price

– Long a put is a bearish positionLong a put is a bearish position– Short a put is a bullish positionShort a put is a bullish position– Long a 108 Feb Globex Put gives me the Long a 108 Feb Globex Put gives me the

right to sell Yen Futures at 108 a on or right to sell Yen Futures at 108 a on or before Feb 6before Feb 6




Strike PriceStrike Price– The price at which one may purchase or The price at which one may purchase or

sell the underlying vehiclesell the underlying vehicle– On calls, the lower the strike the more On calls, the lower the strike the more

valuable the optionvaluable the option– On puts, the higher the strike, the more On puts, the higher the strike, the more

valuable the optionvaluable the option– Looking to buy 10 of the Sep 91 Swiss Looking to buy 10 of the Sep 91 Swiss

Franc CallsFranc Calls




Implied Volatility- (IV)Implied Volatility- (IV)– Perception of the future standard deviation of Perception of the future standard deviation of

the underlyingthe underlying– The higher the implied vol, the greater the risk The higher the implied vol, the greater the risk

premiumpremium– The lower the implied vol, the lower the risk The lower the implied vol, the lower the risk

premiumpremium– Higher volatility is associated w/ greater riskHigher volatility is associated w/ greater risk– Implied Vol on Gold is around 37Implied Vol on Gold is around 37– Implied Vol changes depending on month and Implied Vol changes depending on month and

strikestrike




Expiration MonthExpiration Month– Days Until Expiration (DTE)Days Until Expiration (DTE)– Plays upon the time component of an Plays upon the time component of an

options value (Theta)options value (Theta)– Owning Feb 900 Gold Puts gives me the Owning Feb 900 Gold Puts gives me the

option to sell at 900 on or before option to sell at 900 on or before January 27, 2009January 27, 2009




Intrinsic ValueIntrinsic Value– The value of the option if it expired The value of the option if it expired

immediatelyimmediately– Canadian Dollar 82 Calls with 6C trading Canadian Dollar 82 Calls with 6C trading

at 8224 has 24 ticks of intrinsic valueat 8224 has 24 ticks of intrinsic value– In-The-Money (ITM) In-The-Money (ITM) – At-The-Money (ATM)At-The-Money (ATM)– Out-of-The-Money (OTM)Out-of-The-Money (OTM)




Tick Value of the option matches the Tick Value of the option matches the tick value of the underlyingtick value of the underlying

Euro FX options have tick value of Euro FX options have tick value of $12.50$12.50

Euro FX moves from 139.50 to Euro FX moves from 139.50 to 139.70 equals 20 tick move or $250139.70 equals 20 tick move or $250

Euro FX Jan 139.00 call moves from Euro FX Jan 139.00 call moves from 95 to 105, a 10 tick move, or $125 95 to 105, a 10 tick move, or $125


Background of the GreeksBackground of the Greeks

DeltaDelta GammaGamma ThetaTheta VegaVega



DeltaDelta– The ratio comparing the change in the The ratio comparing the change in the

price of the underlying asset to the price of the underlying asset to the corresponding change in the price of the corresponding change in the price of the optionoption

– For example, a call with a delta of .55 For example, a call with a delta of .55 would see the option rise 55 cents for would see the option rise 55 cents for every dollar the future roseevery dollar the future rose


DeltaDelta


Background on the GreeksBackground on the Greeks

Vega - Measures impact of a Change Vega - Measures impact of a Change in Volatilityin Volatility– The amount the option price changes w/ The amount the option price changes w/

a 1% change in volatilitya 1% change in volatility– Can increase or decrease w/o a change Can increase or decrease w/o a change

in the underlying pricein the underlying price– Vega of -81.90 means call will lose 8 Vega of -81.90 means call will lose 8

ticks for every 1% drop in implied ticks for every 1% drop in implied volatilityvolatility


VegaVega



ThetaTheta– Theta measures the rate of decline of time-Theta measures the rate of decline of time-

premium resulting from the passage of time.premium resulting from the passage of time.– Option premium that is not intrinsic value will Option premium that is not intrinsic value will

decline at an increasing rate as expiration decline at an increasing rate as expiration nears.nears.

– Calls on USA (30 Year Bonds) decline at theta Calls on USA (30 Year Bonds) decline at theta rates of T+6 at .20 cents, T+14 at .45 cents, rates of T+6 at .20 cents, T+14 at .45 cents, and T+20 (expiration) at .75 centsand T+20 (expiration) at .75 cents



ThetaTheta


ThetaTheta



GammaGamma– The rate of change for delta with respect to the The rate of change for delta with respect to the

underlying asset’s price. (usually 1%)underlying asset’s price. (usually 1%)– Gamma shows how volatile an option is Gamma shows how volatile an option is

relative to movements in the underlying asset. relative to movements in the underlying asset. Watching your gamma will let you know how Watching your gamma will let you know how large your delta (position risk) changes. large your delta (position risk) changes.

– First derivative of the delta, used when trying First derivative of the delta, used when trying to gauge price of option relative to the amount to gauge price of option relative to the amount it is in or out of moneyit is in or out of money

– Options deep in or out of money experience Options deep in or out of money experience nominal gamma change, at-the-money see nominal gamma change, at-the-money see greatestgreatest


Gamma GraphGamma Graph


One Shot – One Kill Trading Products & Services One Shot – One Kill Trading Products & Services [email protected]@osoktrading.com

Trading Conference ScheduleTrading Conference Schedule– New York Traders Expo (Feb. 21-New York Traders Expo (Feb. 21-

23)23) One Shot – One Kill Trading BookOne Shot – One Kill Trading Book Options Trading WebinarOptions Trading Webinar SniperScope – Live Trading RoomSniperScope – Live Trading Room Live Hedge Fund Trade AlongLive Hedge Fund Trade Along

– March 4-6, (8 AM – 5 PM)March 4-6, (8 AM – 5 PM)


Trading Conference ScheduleTrading Conference Schedule

New York Traders Expo: Feb. 21-23New York Traders Expo: Feb. 21-23CME Group Panel (Ask the FOREX CME Group Panel (Ask the FOREX

Experts)Experts)Panel on “Going Pro: Using Your Panel on “Going Pro: Using Your

Trading Success to Start Your Own Trading Success to Start Your Own Hedge FundHedge Fund

Live Hedge Fund Trading Tactics Live Hedge Fund Trading Tactics Unplugged Unplugged


SniperScope Live Trading RoomSniperScope Live Trading Room

SniperScope – Live Trading RoomSniperScope – Live Trading Room– Real Time Positions, Working Real Time Positions, Working

Orders, Profit and Loss Orders, Profit and Loss Statements, Trade Confirms Statements, Trade Confirms

– Charts, Analysis, Trader Charts, Analysis, Trader Commentary, NewsCommentary, News

– ($395 a month)($395 a month)– Free one-day pass on Thursday, Free one-day pass on Thursday,

Jan 15 – Jan 15 – [email protected]@osoktrading.com


WebinarWebinar

Options Strategies for a Volatile MarketOptions Strategies for a Volatile Market– Dynamic strategies for 2009 (spreads, Dynamic strategies for 2009 (spreads,

position management, market outlook, position management, market outlook, volatility compression/expansion etc.)volatility compression/expansion etc.)

– Equities, Fixed Income, Energies, Equities, Fixed Income, Energies, Currencies, MetalsCurrencies, Metals

– Saturday, January 24, 10 am ET – 1 PM ETSaturday, January 24, 10 am ET – 1 PM ET– sign up of $79 if you sign up by January 12, sign up of $79 if you sign up by January 12,

otherwise $99otherwise $99– [email protected]@osoktrading.com


Trading WorkshopsTrading Workshops

Live Hedge Fund Trade Along -Live Hedge Fund Trade Along -– Wed. Mar 4 – Fri. Mar 6 (8 AM – 5 PM)Wed. Mar 4 – Fri. Mar 6 (8 AM – 5 PM)– Full multi-monitor computer setup, high Full multi-monitor computer setup, high

speed internet, data, trading accessspeed internet, data, trading access– Hosted at NetBlack Capital’s office in Hosted at NetBlack Capital’s office in

Manhattan Manhattan – Cost – Normally $4,500 reduced to $2,500 Cost – Normally $4,500 reduced to $2,500

(sign up by Jan 12 only $1,950)(sign up by Jan 12 only $1,950)– Limited to six peopleLimited to six people– 650-589-3450 for more info650-589-3450 for more info


Current Options Prices and Market Current Options Prices and Market ViewsViews


Preview of Part IIPreview of Part II

Synthetic Calls/Puts Synthetic Calls/Puts StraddlesStraddles StranglesStrangles Calendar SpreadsCalendar Spreads CollarsCollars Call Spreads and Put SpreadsCall Spreads and Put Spreads

Options Strategies


Review of PresentationReview of Presentation

Basic Option ComponentsBasic Option Components Background of the GreeksBackground of the Greeks Using Options SoftwareUsing Options Software Placing an Options TradePlacing an Options Trade Key Options Prices in MarketKey Options Prices in Market

Date post:	15-Nov-2014
Category:	Documents
Upload:	johnnetto
View:	3,529 times
Download:	3 times

Gamma Trade Options With John Netto (Interactive Brokers)

Documents