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by grecy 2156 days ago
My brokerage will only let me buy options in the standard batch of 100, which means to get anything I'm interested in I need to drop $20k, which isn't going to happen.

I only want to spend a couple of hundred on long term options ..
2 comments
JumpCrisscross 2156 days ago
> I only want to spend a couple of hundred on long term options

Former options market maker. And honest question. Why?

Long-term options are tricky because theta and rho, the least intuitive components of the option pricing model, become significant as tenor increases. If you want to take a leveraged bet on the market, a margin account or leveraged ETF is safer.

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grecy 2156 days ago
I have a good portfolio of stocks, and to be honest I want to bet a hundred or so here or there. I never buy lottery tickets or anything like that, but I feel like it's a good chance to take.

It has nothing to do with safe, and is about risk v reward.

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vmception 2156 days ago
the market underprices implied volatility on long term options, because it just doesn't know, which is an absolutely awesome.
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KMag 2156 days ago
What do you mean by underprice implied vol? I think what you mean is that vol is underpriced, not implied vol being underpriced. Implied vol is just a function of 4 factors known at at the time of the trade (underlyer spot price, option premium, option strike, time to expiry) and one unknown (risk-free interest rate over the lifetime of the option). Saying they've gotten implied volitility wrong implies they've mis-entimated the risk-free interest rate. I think instead you mean they under-estimate vol, not implied vol.
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PascLeRasc 2156 days ago
Unfortunately the viability of options depend on their volume - you can have a call go from OTM to ITM and not be able to find a buyer because there's just no interest in it. Half-options (50 contracts) and other denominations exist but they're incredibly rare, and I believe only used for reverse stock splits. If you're looking to get into options I'd recommend either choosing a farther OTM strike price/earlier date or starting with a stock that's significantly lower in price.
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