Search results

You are good to point out the synthetic. More about that later. Yes we are trying to think about manageability, but I'm still not sure what your point is or rather why you would prefer the straddle and think that it would be more "palatable"? Do you prefer living on the edge? Yes the...

Wouldn't that be the pits? Better know that probability for Oct. Looks to be less than 1% for Sep options at 15% vol.

Eliot, Since we seem to have been found and dumped on by the vanguard of the vulgar and uneducated, perhaps it would be good if you introduced yourself and gave some background on your trade with the Yahoo group?

Given the above homework list, I suppose the thread will end now until sometime next year when somebody has read all that. The last paper is nowhere to be found, so why don't you post the pdf? On the other hand, suppose one has mastered the use of cointegration and is able to create a...

Why do you say that the gamma risk of selling straddles can be more manageable? Often adjusting short straddles mean you're losing money. If he hedges with a future position at a short strike, he's got a covered position. Balance the deltas and it should work, except for the gap risk which...

This paper is excellent. I have read it before and it is good to read it again. I just wish the part on proxy hedging was as clear as the prior parts. I too am more visual than mathematical. My readings on cointegration have given me the understanding that it is used primarily for longer...

Last risk graph was not altogether correct but in the general spirit of things. Agree on put prices. Using mean prices the credit on the put BWB is .15, making the credit for the whole thing .45. You need to make a gif file -- screenshot of your risk graph. If you don't know how to do...

Eliot, I have constructed your position with EOD data useing mean prices. The call BWB shows a credit of .30. The put BWB has a debit of .08. The combined position has a credit of .22. Risk graph attached.

When playing long what? Finish the sentence. First you need to have a decision or at least a leaning toward either dispersion or reverse dispersion based on the index and its total constituent stocks (100% replication). Then you can carry out your decision by the selection of stocks for...

Evidently you have not read my last post above where I clarify the confusion between an index and a basket. The title of the thread says "index" so I thought that was the subject -- understanding how the vol of the index is computed from its constituents -- which have fixed weighting. Now you...

rosy, my apologies for jumping on you. The context of the basket was not crystal clear, and generally speaking a basket is constructed as opposed to an index which is fixed (relatively speaking). Perhaps you had an insight that was not expressed? Let's pose a situation: You have an index...

Eliot, applause for your effort to find a free trade. Sometimes our effort clouds our vision. It appears that you are trying to create some kind of box BWB. That might be a first. This is not a TOS help forum but generally speaking there is a difference between position profit and...

Wouldn't it be great if we could change the weighting in the basket to whatever we wanted it to be? But you don't seem to get the point. The weights in the basket are given. They are fixed. They cannot be changed willy nilly by traders. For our purposes they cannot be "better", and they...

We are still in two dimensions are we not? So how does this improve on the correlation between each stock and the index? What is the synthetic asset? The weight of each stock is given and does not need to be determined.

I didn't ask whether you were buying the calendar. I asked whether you were selling the ES/EW options. If you buy a calendar using October exp for long you can sell ES/EW 4 times.

Yes I agree with that but this is a double calendar position that is directly shown in a P&L graph. "r/r" is ambiguous. You must mean risk to reward. So what about those ES and EW options? Have you tried selling those every two weeks?

We have discussed this last year in the EGAR thread. Didn't know you were doing work in this area. Last year we determined that dispersion trading can be done on the Dow for example with an account of modest size (within the reach of most traders). Could you explain exactly what you mean by...

Excellent suggestions, although IV hurting the ratio spread depends on which way IV is going. It could help it also. Same applies to the time spread, so I assume you don't do these when IV is high. So do you sell options every two weeks, both ES and EW? Could you give an example of...

There is a saying we have all heard: "Beggers can't be choosers". That applies to our desire to get a credit and the choice of strikes. In times like these we are begging for a credit. That forces us to get closer and closer to the money because most strikes would result in debits while...

Right now is a very difficult time to do 1-2-1 BWBs because of the low implied volatility. One of the ways around this is to look at non-equity indexes such as the XAU with a current IV that is 50% greater than the stock indexes. Attached is a partial risk graph done a few days ago -- a 1...