Recent content by monkeyjoe

Would you explain more? Is this a custom measure like the pitchfork figure on skew?

Even if he comes off a little harsh, he (@destriero) is really knowledgeable about options and has shared a TON of info (just like @sle) with me and many others over the years. No worries at all. Just trying to be helpful.

Never heard that one before! The market really can test your comfort zone I guess.

If anyone's wrong on the interpretation, I assure you it's me. I agree with everything you said... Obviously this is just a way to know you have too much gamma risk on, definitely need to also consider stress testing, vega risk, etc. ... Maybe we are talking past each other. Can you clarify...

The guy has infinitely more experience than I do so I won't claim to speak for him, but I think the argument is that it's a good consolidated risk measure in the sense that you collect theta for selling gamma risk. It might take 3x the position to achieve the same theta farther out, but then it...

atticus once recommended keeping theta under 1% per day as a sort of maximum risk tolerance. https://www.elitetrader.com/et/posts/3479875/

It's good to see you are back. ;)

OP - in case it's not obvious, instruments like the VIX futures are pure plays on IV: http://www.cboe.com/micro/vix/vixfuturesprices.aspx edit: fixed quote.

@atticus once mentioned microstructure as a factor that could gain a few points on occasion. Basically, OTM options are more liquid with tighter spreads... So, if you expect spot to be above your strikes, choose puts, or if below, choose calls. He did this mostly with butterflies and...

This really needs an answer. There should be no way for you to systematically extract profits from random noise. Unless you are imposing some structure on the randomness that your system can exploit. Are you imposing mean-reversion (or fractionality) in the simulated gBm? What about correlations...

Me too.

funny shit. :D

I guess that's the point I'm making. It's fine to have Sharpe as a metric, but then using Sharpe^2 is the identical metric. It contains no more information. Example: Strategy 1 - Sharpe = 1.5 Strategy 2 - Sharpe = 2 Clearly Strategy 2 dominates. Now if we compare them by Sharpe^2, we will see...

You guys keep arguing about candidate performance metrics which are monotone increasing transforms... none of these can be any better of a metric than the base figure. Think of it like this, if a strategy maximizes some metric, x, relative to other strategies, then it also maximizes x^2...

How much are you paying/have you paid? Does it add up to a substantial share of PNL?