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This might be true, or might not true (stating the obvious) based on the timeframe you decide to base it on. While it is true that the new tastytrade brokerage (called tastyworks) will be a revenue stream for them, a few things stand out and I would like comments on this from anyone here: 1.-...

Excellent Point !!! I guess further hedging at that point is out of the question since everything would be so elevated (i.e. high IV) because of Vega, Delta (it being the new ATM and having the most Extrinsic Value) and like you said, Vomma and who knows how many other higher order greeks. By...

Except on the VIX, since front month (which you'd be short) could explode while your back month (the one you are long) barely moves

Delta neutrality will depend much more on underlying move in the interim than what IV does in that same period.

It makes sense... well, since hedging is done to eliminate the position risks you don't want at that particular point I would use whatever IV is present at that time (i.e. not the 30 that you believe it will end up at)

Illiquidity. Market makers have to hedge their positions and for options that are very cheap (near zero) it is just not cost effective to their business model so they widen the bid/ask spread to compensate. When the option you are trying to buy/sell should be 0.02 a bid ask spread of 0.05 will...

Not really sure what you mean here. Based on your post it appears that you are delta neutral, long theta/short gamma and short vega. When you adjust to get to delta neutral you are only trying to neutralize the effect of price movement while waiting for: a) the current value of your strangle to...

Why wouldn't you be able to have several uncorrelated (as much as possible) events (trades) where you are risking only a small part of your portfolio on each (say less than 1% per trade)? then let the probabilities play themselves out using eventual mean revertion of volatility as a solid...

That is the actual formula but a quick and dirty, "eyeball" method is to see or extrapolate where calls and puts have the same price . At that point their value would consist entirely of Extrinsic (time) value and it would be approximately the ATM for that underlying's value at expiration

This is true, in which case he doesn't even need to own the underlying.

I guess going into more detail would clarify some things here. Let's do an example, for the /CL trading at 50, the 50 put trading at 0.75 and the 51 call trading at 0.30 1) You have /CL and buy a the 50 put. Since you incurred a 0.75 debit for buying the put, if CL goes to 51 you only make...

To answer your question: (using all options on the same expiration as expiration of Futures contract) 1) Buy a put It costs money, which you will have to make up for in your contract going up but you will lose only up until your contract's price hits the strike price. 2) Sell a call for a...

I think the difference is that with options one could construct a position designed to take advantage of the passage of time, or of changes in Implied Volatility (what the market thinks about how risky the underlying asset is) understanding that the risk for that trade is transferred somewhere...

If what you mean by "Do you think it is possible to trade the bars ?" is to take advantage of intraday fluctuations between the pair, here's what I see: - Based on today's data the difference between the two oscilates between -0.8 and -1.4 so that is a 0.6 /ES point swings (i.e. slightly more...

It is always positive and increasing. Remarkably consistent

Do you agree that SPX-spot is a straight calculation from the components' prices? If so, then yes, when a stock goes ex-div its price will decline and this will be reflected in the value of SPX. Dividends only come into play insofar as they make the index go down when a stock goes ex-dividend...

I will look it up... your posts are always informative and well thought out (although a bit over my head sometimes :-)

I am not an expert on Indices and their construction, but it is my understanding that the SPX is instantaneously calculated from the market cap (actually, float)-weighted prices of its components. If anyone knows anything differently I would love to know ;-)...

The numerical value of SPX is calculated by a formula that takes into account only stock prices (with no accounting for dividends whatsoever) OPTIONS on SPX for a certain expiration will reflect the fact that some of SPX's components (dividend-paying stocks) will have a price that will decrease...

Hello everybody, first time poster here. I have a conceptual question for option traders specialized in Volatility Skew. If we take a look at any index product (or their ETFs) a noticeable skew is observed on the downside. For example, looking at OTM puts as of today (for the May 19th...