I'm not allow to write "index put" only "equity put".
It look to me that individual stock in more volatile.
Index reflect the average of the all market, so it shuld be less volatile.
2006-10-10 06:13:36 · 7 answers · asked by Mostar 1 in Business & Finance ➔ Investing
If as Mike S wrote
"An index, on the whole, is always less volatile than individual stocks... some stocks even lose all their money due to bankruptcy... you simply won't find all the stocks in any index used today having all those companies go bankrupt at exactly the same time."
One not allow to write "index put" only "equity put"?
2006-10-10 17:23:12 · update #1
Microsoft might move $1 in a day. AAPL might move $2-3.
OEX might move $5-10, NDX might move $10-20, SPX might move even more
The Dow regularly goes up/down a hundred points.
If you're on the wrong side of one of those trades on even a normal day, you could lose A LOT of money.
The firm needs to protect itself in case that happens and will authorize accts to ensure its best interests are considered first.
That said, once you've backtested and papertraded trading indexes and have a high expectancy ratio, there's nothing to say you couldn't reapply for level 5 authority (to sell naked index options). Just be very careful whatever you do.
In the meanwhile, there's nothing wrong with doing credit spreads or some directional calls/puts that are a little in the money to get the majority of a move.
Hope that helps!
2006-10-12 04:12:19 · answer #1 · answered by Yada Yada Yada 7 · 2⤊ 0⤋
An index, on the whole, is always less volatile than individual stocks... some stocks even lose all their money due to bankruptcy... you simply won't find all the stocks in any index used today having all those companies go bankrupt at exactly the same time.
2006-10-10 22:39:31 · answer #2 · answered by Mike S 7 · 0⤊ 0⤋
Indice wont be volatile than a good stock ( share )
Dont compare Indice with a Dull Stock...
Each and Every Index consists of Highly Volatile and Dull stocks
(According to the Index )
Compare your Index with a Good stock.. then you will know the answer...
"Index would never over react than any of its own stock..."
2006-10-10 13:24:39 · answer #3 · answered by Jin 4 · 0⤊ 0⤋
Equity indices are less volatile than most individual stocks. This is well known, and the cornerstone of modern portfolio theory.
2006-10-10 13:27:37 · answer #4 · answered by Ranto 7 · 0⤊ 0⤋
Wow.... I hope you don't invest like you write!
As a general rule (not always), an individual stock will be
more volatile than an individual stock.
2006-10-10 20:23:20 · answer #5 · answered by Common Sense 7 · 0⤊ 0⤋
A 1% change in IBM at $100/sh would be $1.
A 1% change in the Dow at 11840, would be 118 pts.
2006-10-10 13:26:05 · answer #6 · answered by dredude52 6 · 0⤊ 0⤋
Download this free financial software
http://www.lsefinance.blogspot.com
2006-10-10 14:09:34 · answer #7 · answered by iconsulte i 1 · 0⤊ 0⤋