Recent content by what_hedge

Orderly sell-offs have not lately been met with IV explosions - it has been typically the opposite, so in the event of a slow drift downward over the next month or so, vols don't necessarily have to continue to rise. Moreover, in the alternate downward scenario - a violent continuation of...

Given the actual volatility of futures lately, it is not surprising to see incredibly wide bid-ask spreads. As market makers, even if we have a reasonable lean on a trade (have the opportunity to buy options on a low vol somewhere vs selling them on a high vol elsewhere), when futures are...

This is not always the case. At our firm we work back into an implied volatility, pricing options on a weighted-vega basis according to the prices at which the at-the-money contracts have been most recently trading. When order flow is demand driven, we raise the value of the at the money...

If you truly expect the market to reverse up then you may as well just put on a call spread or a call outright. If premium is an issue then put on a wide call fly with a decent range until you touch your shorts. I don't recommend selling options based on your expectations, because any option...

Just my two cents, from a market maker's perspective - In this environment, if you are short any call or put <10 pct out of the money I would highly recommend covering for a nickel, unless you are covered 100% and perfectly content to be called away on your stock position. Lately, if...

Yes, short term volatility could definitely affect the price of an option, but perhaps not in the way you are thinking about it. When it all comes down to it, there is no "plug-in" variable to the option pricing model that determines what an option is worth. Everything boils down to supply...