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I understand the idea, but I have to look more into the implementation of gamma scalping, like neutralizing at 1 SD? I've done a search here, but I didn't find specifics or journals focusing on gamma scalping.

Heh, that's true. There's no way to know or completely contain the risk of the back month option with the front ones. Okay, that's what I thought. Thanks!

Thanks bebpasco. So he would buy the straddle and gamma scalp along the way, and exit prior to EA?

H John, Thanks for your reply. Yes, I tried to neutralize everything, but it just doesn't work. :) So looking at the strategy you posted, you're short the back month stangle and long the front month further OTM strangles. (If you have to make them credit and debit spreads because of...

LOL I looked at the P&L graph after I wrote the post and figured out potential problems with the position. Shouda done that first. Thanks.

Thanks much, spindr0. I am starting to get a feel for the basics, and which strategies might make sense in which environment. Okay, one more question, if I may: Let's say a stock is in a historically relatively low IV environment, and I think vol will either stay or increase. If I did...

With the strangle-straddle swap, it seems like it's always a trade-off between how much gamma protection you want vs time decay with the extra wings, right? The vega also increases with more wings added. So, when going long the calendar ratio, do you wait when IV is low in general or big...

By ratio, do you mean buying more of the wings, or selling more of the guts? I had toyed around with pair trading for relative strength a long time ago. There's an interesting, ongoing journal entry by johnnysharp, aiming for reverting to mean, which I've been following and might try after...

Perhaps I overstated my skills as a directional trader. For over 5 years I have lived off my earnings, but mainly from covered calls on a basket of solid stocks. Depending on my outlook for the individual stocks and the market in general, I would place the CC OTM, ATM, or DITM. I put aside a...

I am also trying out small calendar spreads on earnings play, just getting a feel for it. Pair Trading - Are you doing this with two stock pairs, or with options? Wasn't this type of hedging one of the original ideas behind hedge-funds? Thanks.

Thanks John. I have read through many threads on ET and some of the articles people have attached, including examples of IC adjustment trades. One of the articles I read had someone roll down the whole position but in so doing sold more total contracts of the further OTM options, which didn't...

Thanks spindr0. I was mainly wondering if predicting what the market will do next is a factor in the way you adjust - when and how much. I guess this is something like the reverse of gamma scalping? If you buy a straddle, you have to determine when you want to scalp and how much.

I see what you're saying. When and how much protection to put on depends on your comfort zone and not necessarily on your outlook. I do feel more comfortable predicting direction than not predicting direction, and most of my trades are directional. I'm just trying to get a different...

If I can ask a question to IC traders, sort of a philosophical approach. I'm more of a directional trader, usually using TA and fundamentals to determine my trades. So for me, I would enter in a neutral position when I expect a trading range market. I've heard that it might be better not to...

Thanks for the advice/warning, Mark. I have back tested earnings play (IV crush) and found that the long FOTM double calendar strangles (not the reverse calendar) did okay, and I have only put on a few real trades of this in April that turned out well. But yes, one really big move could damage...

Thanks heech - I'll check them out. I didn't know ivolatility did that. I just have the basic to show the yearly IV chart for stocks.

heech, what service do you use to scan for stock IVs that are historically high or historically low? I know OptionVue can - I was just wondering if there are some other services that provide this. Thanks.

I'm thinking of stock indexes (Indices?) and stocks that I have been trading for a long time and feel comfortable with their movements. I'm also testing other option strategies with small trades, and I have a whole bunch of historical options data that I still need to go through!

Thanks John. I'm still trying to find out what kind of adjustments I feel comfortable doing for some of these types of trades. And yes, I usually try to pick low IVs based on historical IVs, but sometimes it just keeps going down!

It looks like a reverse uneven slingshot position to me.