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El it looks like our strat would have worked. Sell the straddle on M close first thing in the morning and then open a new long straddle to take the intraday move. I mean everyones hindsight book is up 1000% but I think we broke it down pretty good.

Well you got to ask yourself, if there is a "repair" strategy, Why not just put it on in the first place before the damage is done? You can also tell the guy in the article is a rookie when he states "delta neutral gamma positive hedging is perhaps the best way..." he's just trying to look...

Hey trader Joe, There are so many naive thoughts in that article I am not to sure where to begin. I think you should discard it. If you sell a put, you have to have a reason for selling it. Lets say your reason is "IV is high and I think the markets will rally". When the markets instead...

I have to agree with El here. If this thing breaks, get your friends, family and neighbors money and buy as much as you can. You should be a millionaire by next Friday. Just make sure to not forget about me when you have your yacht party with strippers and $10k bottles of champagne.

This is an understatement Edit: Actually short double diagonals could be initiated in steep smile environments to be both long gamma and theta which makes for a good trade. But besides that....

LOL, hey man, talking with Des is like reading Shakespeare... You have to read it a few times, and then once you finally understand it, you ask your self "why didn't he just say..." LOL. He is very informative once you break it down.

Sorry Des, having trouble with your code here. IRL? Do you not agree with the market that downside vol should be elevated?

Here is the trade CML dude is referring to. This is the Long delta 40, short 2x delta 30, short 1 delta 22, long 2x delta 15. I do not see anything special about this. If not delta hedged this is a directional trade, with a brutal risk reward. Even if you wanted to consider this as a short...

Maybe my question should be, why would I decide to use a local vol or Stochastic vol model for determining fair skew rather than the BSM.

Why not post a trade that you think is reasonable. With real numbers. We can break it down and see whats missing or better yet where we can make money.

No question is stupid if you are putting in the effort to solve it. Without going into how the term structure moves in sqrt(time), shrink the volatility to post earnings predicted vol. You will see the calendars get very narrow.

Your going to make 1000% I am not to sure why you are worried about the spread here.

This is a great study Ophir, thanks for sharing. Would you mind posting what a leveraged stock position in GOOGL, AMZN and SPY would have looked like over the past 3 years. If you have time, could you also back test this same strategy on Yahoo, QQQ, CSCO from the time period 1995 -2000? Thanks...

LOL cmon Des! Whats the price tag

When you are deciding if the skew is fair, are you looking at local vol? I am finding it challenging using BSM to decide if skew is fair. Ie. SPX 90% 3 month skew is 16% but if spot actually trades to 90% moneyness, then spot will most likely be around IV of 30%. Local vol is telling me 47% for...

I agree the 231 is very nice. In fact when you qoute some of the flies with flat skew, they are usually 100% more than market(longer dated flys 60 - 100 Dte). I have noticed you trade very slightly OTM 231 P flys short dated. Why not go a bit further OTM and get more skew? You trade the 2 week...

Hey tom, I think we might be talking about different things. I am interrested in modeling using local vol and SABR models, not so much towards IB's models.

I am going through the paper right now. Could you elaborate on "skew proof".

long 2 85% short 3 90% long 1 100% (for most of my trades). What model are you using? Skew for Local IV is usually 2x BSM.

I am trading 231 P Flys into steep skew. I was wondering if I should be using Local vol for my inputs rather than BS. I was also thinking of using the SABR model but do not think this is necessary for a book of vanillas. Thoughts and opinions are appreciated.