Hi Rob, thnks for reply, it's the same here in UK , I am quite busy in my daytime job, so not much time to follow the spot markey at present.

I have the Margin calculation tool on the real trading fx options panel on Saxo as well but generally dont look at it as it is not much telling from what I could already figure out from all the other information like the greeks also provided on the same trading panel. So that is only my way, I guess I am not paying attention as I am keeping my Margin fairly low and playing it more safe and conservative.....

I checked out IKON and find they have better conditions for spreads and comissions, no doubt it is an advantage.....it is human one sticks with Brokers one has started of with but flexibility and diversification of brokers is part of trading I have come to believe and as I said I am looking for some change..However, I was recently searching for a good US based broker offering a wider range of markets( futures, options,fx spot ETF's as I am interested in stock options as well and found "Interactive Brokers" quite competetive on what they offer and their commissions , any opinion on them??your view is much appreciated!

I am thinking of putting some money in and trying them out as IKON does seem to only trade forex and that can get a bit to narrow in looking at the whole opportunities the market has to offer.... with regards to selling options, volatility seems to ease over Xmas and for selling out of the money is not a bad idea with front month options I believe but one needs to sense a little hint of direction which can help,, for example the GBP USD recently did not look bad for some upside potential recently and probably still looks like it ( I am LONG(bought!) a call the past week here with strike at 1.51 expiry mid Jan and hope for some good retracement up to 1.6 area if not higher in coming 4-6 weeks(note I HOPE!!, I am not predicting or giving advise)....regardless what GURU's tell us on various websites and fx channels ( I stopped to listen to them anyway, I feel they contradict themselves and worst of all most of the time they don't give any timeframes they are looking at.

Until nxt time,

good luck with trading!

Ali

Hi Ali,


Just a short follow up question (hope your New Year has started well)...I noticed that in the opion trading panel in my Saxo account, there is a box
that you can check off lcalled "ioen delat hedge trade". Essentially, if
you take a short FX option position say in the EUR/USD, it uses the delta
caculation for the option to allow you to open a "dtal hedged trade" in
the underlying based on the number of contracts you sold etc...To me, all
it does is just "cover" part of the trade...the actual amount i gather
is dependent on the delta ratio etc...I can some benefit if the underlying
positiong heads up, you are offsetting some of the potential loss on your
short positiong with the partial hedge position etc but how is more effective
than using a specific buy in the spot (somewhere beyond the strike pirce you sold the calls at and a loss point taking into account the premiums you received?)...You mentioned that you delta hedged using other optins, I would
apprecate further comments in this regard.

Thanks.

Rob

Hi Rob,

Thanks, I had a good time and had a bit too much of mulled wine on german Xmas markets. Hope your New Year started good as well.

Coming to your message, it is important not to get 2 different things confused.
In my previous messages I have mentioned that I am delta hedging. And very early in my messages I mentioned how you could avoid a complete catastrophe trading "naked options". these are 2 completely different things.

You write that the platform offers you to check to open the delta hedge dialog after your options trade(I am aware of this feature which has been only recently added on). However, delta hedging means you have to adjust your amount accordingly at any time when the spot price moves,because with the move of the spot price your delta changes as well. See Delta as the real amount your options position is worth at a given time. So therefore if you open an option worth 10 000 USD, your initial value compared to a spot position of 10 000 is not 10 000,it is as much as reflected equal to the delta value at the given time.

So don't be mistaken,you actually are fully hedging your options position but it appears to you as partial....
See it this way..if you sell a call on the Eur/USD for the amount of 10 000 USD lets say at a stike price of 1.3600 and your delta is 0.5(or 5000 USD as shown on Saxobanks window)then you would hedge this position with 5000 USD at that given time. but for example because of a sudden move in the spot your delta has changed to 0.6(or 6000) within few days, then this will require you to adjust your spot position and you would have to buy another 1000 USD long in the spot to add all up to 6000 USD in the spot.

for further reading on this subject go to about options on Saxobank platform and it is very informative.

Now coming to the question of selling naked options:In earlier messages I mentioned that if I sell a call of 10 000 USD lets say at a strike price of 1.3600 on the EURUSD example and lets assume I get credited 400 pips, instead of directly hedging it I enter an order to buy a 10 000 USD spot position at approximately 1.400( 1.3600+.0400). My assumption on trades like this is that I believe that the spot price will not reach this order to get executed so I tkae full advantage of the premium of my sold option. I only use this order like a stop loss. If it gets hit "I will wait until a day before expiry" I will close both my option and the spot for no gain, but not much pain as well.

There is not more than this I am afraid,

I hope it helps but if there is a more specific question then keep it coming,

Take care and best of luck in trading 2009.

Ali