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Suppose I am short a regular put option on a stock in the US option markets. Today it is worth $1,00, and I have a SMART limit buy order at IB at $0.90 in the market, with an expiry date for some day next week. Now, suppose after market close, but before the open the next day, the company...

The description reads "this implies we're living in .. excesses ..". Any merit to that idea? Correlation does not imply causation, I am thinking the recent volatility just reflects that the world ticks at a faster pace in general because of improved communication technology.

Nice! Enjoy. Didn't I read somewhere that you have a job as well? In any case best to you.

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Don't forget interest rates on margin.

Maybe, if you look hard enough. I can't think of an example that is guaranteed to take any of the [ts2,ts6] out of the equation. As traider said, it's akin to finding the holy grail.

My understanding: For example, if IB only sends your orders directly to the market without selling the order flow, your order is 100 shares and the order book has 50 shares on it, then you get a fill for 50 and the other 50 at a worst price. Market makers might want to take your entire 100...

One reason might be that Ameritrade's affiliated market makers give better fills because they expect Ameritrade's clients' orders to be particularly uninformed, compared to IB's clients?

So what is it tailored for? And does it work there?

I did some quick thinking: I suppose a quick and dirty solution could be to delta hedge such that you keep your total delta around 0. With ATM options on the long and short legs, you are +50 on the long leg, and -50 on the other. If prices, and accordingly deltas, move, to e.g. +60, -40, you...

regarding question 1: yes, lookup systemic versus idiosyncratic risk.

regarding 2.: If a bank can sell you such a product, they will (very likely) hedge it themselves by using a combination of exchange traded (or at least simpler, more common) products and dynamics. As I understand, banks typically don't trade against their customers anymore since Dodd-Frank (sp?)...

Question 2: Probably you can replicate such a portfolio by some active repositioning, however the math wouldn't be trivial I can imagine. I am interested in this as well.

Also, did you think about the situation where your edge might actually not be an edge? For example you might be able to predict up days correctly, but those days are "low quality" up days, i.e. barely up days?

If I understand you correctly, your edge is just predicting an up day and nothing more, and your chosen tool is ATM debit spreads. Just keeping the position until expiry gives you chance for the highest reward, closing it (or hedging or other tinkering with it) sooner when it is profitable gives...

Why don't you have a look at barchart or similar websites, and find the pages with bid/ask spreads, volumes, etc.

Yes, that makes sense reading it explicitly like so. Thanks.

Implied volatility tends to exceed realized volatility, i.e. volatility risk premium (VRP). VRP might be harvested by selling straddles for example, and then delta hedging them. Delta hedging can be costly obviously, especially in mean reverting markets, you have to sell down-market, and buy...

Why do you think your experiments you mentioned on profiting from excess IV didn't work?

As a first thought, I would also say selling straddles/strangles and loosely delta hedge to get a better Kelly profile. Of course delta hedging can come at a cost and eat up all theta and more. So more reliable (although slower) should be selling butterflies with positive extrinsic value. If it...