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Just a general comment fwiw. It's not an issue of being theoretical. If you don't get useful results then it's just that your theory is wrong or not good enough. The problem (or the good thing) is that for most real life situations there is no consistent theory and you either have to come up...

In theory skewness should decay with time since for long enough periods the distribution should become closer to normal. There is also an empirical law of skewness decay by sqrt(T). There's a lot more interesting and juicy stuff on this but way over my head. So I am testing this on SPX data...

Sorry it's my fault, I left the question open and general to help discussion or maybe because it is still in this form in my untrained mind. The idea is close to what you describe but then I used a specific example to reply to Dolemite where it might look like I am only interested in vega...

OK so my naive strategy is not the best to put in practice. What you recommend, is it related to the idea of somehow replicating a variance swap? pick strikes Ki and weight as 1/Ki^2? Do you have the straddle ATM and the strangles on the OTM/ITM strikes or some other combination? I can...

It doesn't need to be a losing trade. For example let's say you have a great vol forecast model and you predict the vol to be higher than the option price implies in say 3 months. You buy the 3mo ATM straddle and after 1 month the stock has gone up and the IV is lower. Let's say the straddle is...

I am not sure if there is a proper name for this but I am thinking about rolling a straddle or any other strategy (fly etc) on the strike dimension as opposed to time dimesion. I am thinking that with a straddle strategy as a vol trading bet, for a big price move you suddenly get outside of...

So you initially set it up gamma neutral but during the trade do you dynamically delta hedge? I mean it's not good if you profit from a vol spike and then lose from the drop in spot.

It's interesting that there is a huge retail base trading KOSPI, mainly ppl who try to gamble. There's also a recent paper where the authors claim that the options market (KOSPI 200) is inefficient -don't ask me about the maths: www.wise.xmu.edu.cn/cean/download.aspx?id=342 That's only from...

Sle, this is something you have repeated numerous times in your posts and you've even hinted to a few of these opportunities. IIRC you talked for example about dispersion on less liquid ETFs. Is this something you still like? Or any other ideas or hints you feel like sharing? Thanks. I am...

Since you made that public: Was it mainly a bet on volatility or price? Or both? (price up - vol down)

sle has been really generous with contributing real gems to this forum. And always by keeping a decent profile. If I ever make money (pink swan event lol) I'll send you a cheque :p (not forgetting a few other posters who have been as fantastic)

What is the logic of this trade? There is a premium b/c of higher demand from traders who roll their position to the next month?

Thanks I'll try to "play" on Excel with these suggestions and see how they work.

What about low volume options? Can the small guy compete there? Or is it the risk of getting picked up by an informed trader (I'm thinking of smaller companies/currencies/commodities etc where less public info is available) and the illiquidity risk too high?

Let's say we are happy enough to use a long bfly as an alternative to a short straddle (ATM). For example we think ATM IV is very "rich" and we want to avoid "unlimited risk" of the straddle. Assume this compensates for the bfly risk of greeks changing sign, skew risk etc What would be an...

Thanks for that. Better buy a real lottery ticket instead...

This is only a newb question so apologies if the answer is obvious: I'm playing with the option scanner and this is an example that stands out. DTG according to yesterday's closing prices, ATM straddle, JAN 13, trades at 0.65 ask. Hist vol is 37% (IB value) but this is after a recent spike in...

Is this specifically to take advantage of the index skew? If you sell 10D-20D puts, what trade would you do on the back month? Do you hedge (how?) so you only bet on skew and IV?

I think they are both right, looks like one is daily and the other one annual. Just out of curiosity, where do you get the data for the screenshot on the right?

You can compare with the OTC market which obviously is the highest volume. Free Bloomberg quotes can be obtained: ATM 1M: http://www.bloomberg.com/quote/eurUSDV1M:IND/chart 25D RR: http://www.bloomberg.com/quote/eurUSD25r1M:IND/chart and so on, although you need to do some work to convert...