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(G)ARCH is a waste of time. It doesn't take into account upcoming events like earnings, trading updates, major economic news and so on. For that you need the subjective human touch.

D-V One standard deviation away from the mean in either direction takes in 68% of occurences. Two SD's in either direction 95% and so on. You don't halve the probabilities when looking at a directional probability. I'll bet my dog's dinner on it. It's strange you get exactly half the...

Cheers.

No. For probability calculations you only need input the future volatility. Anyone know how to work that one out :confused:

Surely hedging at a pre-determined sigma event is exactly the same as using a delta limit ? Can't make sense of that. Any chance you could clarify ? Thanks again.

That’s not so. You don’t correct for direction when using a distribution (Z) table, it’s already done for you. The chances of a 2.07SD move down is about 1.9%. Also you are looking at the probability of doubling your money at expiry. The chances of doubling at any time prior to expiry...

Exactly. In other words the actual vol needs to be higher than the implied vol that you purchased. Riskarb If you were gamma scalping a long straddle, what delta adjustment limits would you use. And why ? TIA.

Yes, exactly so. I would agree with that in an illiquid market, with “cautiously” being the operative word. So just to re-cap... 1) An option trade is never long or short, it's just "open" - every buyer is matched with a seller. 2) Determining who initiated the option trade is...

Synthetic mispricing. Spreads would kill it.

Agreed with you there. One point regarding changing IV - Put's and Calls of the same strike trade at the same IV and all things being equal the IV smile will hold too. So... the change in IV may not actually have been caused by the trade you think caused it. I know you know that, but maybe...

Correct, the guy that bought them is bullish, <b>But</b> the guy that sold them is bearish. Open interest is neither bullish <b>nor</b> bearish... they are just open Calls. The same is true on the Put side. Sorry, but I really don't see why you interpret it any other way. Please explain...

What exactly has option volume, P/C ratios or Open interest got to do with future direction ? For every buyer there has to be a seller and vice versa. Open interest is neither long nor short – it’s open. Knowing who actually <b><u>initiated</u></b> a trade may be useful, but even then...

It does. Thanks to you and Mav. Couple of observations; 1) The Vol skew needs to be huge, MASSIVE for it to work. Is this realistic in the real world ? 2) Because this is effectively a free lunch (vega can be hedged) wouldn't market forces be shorting the far dated high vol wings thereby...

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Try not to let it put you off. For sure, there are less than half a dozen posters (on the options forum anyway) with any decent knowledge worth passing on. But it's worth sifting through the chaff to get to the wheat. IMHO of course. You'll know who they are soon enough !

IV trader / Maverick This is not a pissing competition !

Hmm, I see what you mean. That is one HUGE smile. Think I need to work on that example some more ! In the interim - thanks !

Maverick I don't see how a ratio write could make you positive gamma AND positive Theta, regardless of any smile / skew. sle ? BTW, I know my greeks inside out, back to front, and upside down.

Ok, the floor is yours.... Worked example would be great....

Maverick / IV trader Never mind that ! Hang onto your seat, SLE is about to explain how to structure a positive gamma AND positive theta At the same time ! This is hot stuff.... Hopefully !