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Pain, yes, but ONLY if they just bought calls/call spreads and did not attempt to go delta-neutral. Sell overpriced (acc to vol) puts/buy underpriced (acc to vol) calls + sell underlying=long-term profits. It is sometimes called volatility trading. Natenberg has a section on it. Tends...

I would add that another advantage is selling atm is better liquidity. The "disadvantage" in selling atm is the increased likelihood in being wrong and therefore having to protect the position with the underlying. The "advantage"--not a real one, mind you--of otm is the high likelihood of...

At IB I have had troubles with stop orders on Globex (ES options). Otherwise, I am satisfied with IB.

Because if volatility is increasing, then BUYING premium will be more profitable. Premium increases when vol increases. I want to make it easy on myself. Going out further seems safe now, but what seems "far out" today will be "too close for comfort" later if vol continues to increase. By...

Riskarb is right. Thanks. I really need to get more sleep--I misspoke AGAIN (twice this afternoon). I had said "Buy a otm longer term option and sell a closer to atm near-term option" and then to illustrate I go ahead an offer a bogus, contradictory, and stupid example:" (buying a Nov...

I wasn't thinking clearly when I wrote that. Calendars have an advantage over credit spreads in times of rising volatility, and rising volatility often precedes catastrophic market drops (but not always). I'll put it this way, if one MUST sell theta now that the market's volatility is...

Yes, both do have limited risk, but in a market with rising volatility, one would be less likely to lose the entire amount risked with a calendar spread than one would with a credit spread. Credit spreads are neg vega and positive theta; calendars are positive vega and positive theta. Of...

No, it would be a debit spread, not a credit spread. BUT you would be long vega, not a bad thing when vega is rising. This would be a good position to have if vol did not go back down to its earlier lows and instead stayed up. Calendars are good to leg into as well (buy calls when market is...

Happened to me frequently, esp with ES options on Globex. Stop orders are a real problem with IB. Needless to say, I do not use stop orders anymore.

If one bought the calls when IV was low and then closed the position when IV was high after having kept the position as delta neutral as possible, a profit would be possible, if not probable.

During periods of rising vol, calendars are superior to bear call/bull put credit spreads. Calendars are positive theta AND positive vega. If the breakout in vol holds after this week, then the trading range of 10-12 VIX may be over.

This is a reverse calendar (or time) spread. This strategy works best if you feel volatility, or vega, is going down. If volatility continues going up, the strategy can be a huge loser. In strong market moves, volatility can keep going up and up--I would therefore NOT recommend a reverse...

Imagine what Japanese automakers could do if they had the chance to improve GM and F? Probably never will happen, but it is fun to think make believe.

Sometimes those infomercials are the best entertainment on TV.

When I last looked at the balance sheet a few months ago, I came to a similar conclusion about the short-term. Long term is where the risk is in owning GM and F stock. In the case of an economic downturn, I wonder if either company will be able to pay back the long-term debt. Even at...

If one is going to buy puts, I would buy some from a more distant month, like the Decembers. Lower time decay, plus greater vega.

Amen, brother GA. I used to trade the SPX options myself, and used to think that the ES options had too wide a spread. Several months ago I checked the ES spreads again and was very impressed. Needless to say, I only trade the ES options now. Easier to hedge too, with the emini futures...

I'd think that a small cap stock would be more likely to go parabolic than a large or mid-cap stock would. I cannot support this with any evidence off hand; I am making an educated guess based on my experience.

By selling options with more time, he is taking greater VEGA risk, in addition to the obvious gamma risk. Those of us who sell shorter-term options have less to worry about vega. In a strong move, up or down, vega is often the Achilles heel.

One can go to Wealth Lab (the old, still free, pre-Fidelity version) and test many of his systems. Most did well in the volatile years of 1999-2002, but many have broken down, and some trade much less frequently to the point that I have to question their statistical validity (not enough recent...