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OK, so let's see if I understand this. Say you sell an option. There is a relationship between what IV you sell at and what theta/gamma you sell at. Once you sell an option with a spesific IV or theta/gamma, it's a "lock in". Should you choose to hedge with a lower gamma than the one you...

Yes gamma is definitely a threat and constant rolling seems to be the only way to deal with it. Quite a pain in the ass I'd say. Also I'd assume you'd have to roll long before gamma flips around, to keep it safe. Then there's the vol factor. I dont remember the vega risk graph of these but maybe...

BTW I realize you aren't monetizing skew per se, as you say, it's quite complex and I probably should have used different terminology. My point is that by adjusting whatever gamma you hedge your premium at, you essentially re-price the IV that your premium was sold at. For instance if you hedge...

That would be the same as not hedging the straddle at all, wouldn't it? Because you essentially expect to keep the entire straddle premium and thus see no need to hedge....

Thanks for the input Essentially my above point is that you hedge whatever premium you receive in a way that within expiry, gives you the exact same PnL you would expect from selling the premium at the 25D put instead. Because the 25D put has a more favorable theta/gamma ratio, hedging your...

I've thought of something, say you want to exploit what you think is high skew, isn't it possible to just sell a straddle (or any structure, vertical, whatever, anywhere on the chain) asses it's theta/gamma ratio, then instead of hedging it with it's real theta/gamma ratio, hedge it with a...

Ugh, diagonals and calendars would be perfect if it wasnt for the erratic and flipping gamma closing into expiry or with price moving towards the wings. Say you want to isolate volatility with these (hedging gamma), what do when it gets closer to the wings? Give up?

Probably backing out IV isn't even neccessary for comparison, the theta/gamma value I think can be used alone and to me at least it's more inituitive than IV. Also plotting it (for single options accross the term structure) in a 3d-chart it looks similar to the IV term structure. I tried...

Say you buy a bear put spread by buying a PUT @25D and selling a PUT @10D. The 25D has an IV of 14% and the 10D has an IV of 18%. Say you then deltahedge this, and at expiry you've realized 10% volatility. Then what is your loss? Loss is IV you bought at minus your realized vol but what IV did...

That nothing is free

VIX ETFs are an investment in contango/backwardation, not cash VIX. It's impossible to invest in cash vix, else easy arbs would be all over the place

As you say, composite IV is not the same as ATM IV. So you need to either find historical data for ATM IV, but as you say I have no idea where to find such historical data. You would probably have to make your own database (pain in the ass) Or you could replicate Composite IV via trading a...

Say you have an ETF/stock/whatever in a consistent downtrend but occasional spikes, like the VXX. You want to profit off this, but limiting potential losses on a spike, whilst maximizing return on risk. You can not be short gamma/long theta, because that constitutes to "unlimited risk". But you...

May I ask how do you identify trends? Time series analysis or just visually?

I had no idea, always learning something new on here :)

Actually looking at the VIX option deltas for Nov 19 '13, vs the future for Nov they don't check up. For instance the 17 call contract has deltas of 0.52 implying the future should be at ~17.2 but it's at 16.62 now...maybe there are other factors I'm missing. I may be way off The only...

Yes that was a sick move. Same for the December 2012 fiscal cliff debacle, at least in the volatility mkts. Never before have I seen so much volatility dissappear in such short time. I mean, sure spikes can be violent. But you can just as easily be wiped out quickly to the upside, and since...

These days it seems markets "crash" to the upside more than the downside. 15 days of losses nearly wiped out in just 2 days.

Agree completely Why so mad? Was it my comment about austrians?:D

What would those unintended consequences be and how do you intend to profit of them..? just curious.