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If long the YM I would short the ES dollar neutral, and vice-versa. -segv _/\_____________ft

There is a difference in "statistical" and "theoretical" edge. In the former case the edge may not actually exist, but in the latter case you could just be wrong. :) --segv

The implication of the Cauchy assumption is that the mean is undefined, and therefore the variance and standard deviation are undefined. A random sample from a Cauchy distribution could easily appear to be log-normal and leptokurtotic while the tails are out-of-sample. In a normal distribution...

That is quite a theory yip1997, but the naked premium writer phenomena is easily explained by randomness. Take a large universe of naked premium writers and then remove the population with negative returns. The strategy will appear superb based on the returns of the remaining population. -segv

What if the distribution in question is actually a Cauchy instead of merely leptokurtotic and log-normal? What would that imply about where you should buy or sell options? What would it imply about the volatility and the theoretical pricing model? --segv

I'll PM you for his address, because they neglected to put one on the site, and the feedback form has the same error. :) --segv

The text of the server-side error:

When I attempt to register as a user, I get a server error about remote permissions for the script. This happens for user registration, password retrieval, and feedback forms. --segv

I wonder if RightEdge realizes their user registration system is still broken. --segv

I think that this is the most loaded question I have ever received on ET. :) I suggest you start with the following article, which brings more clarity to the subject than I could ever hope to provide you in a short forum post: http://www.wilmott.com/pdfs/021118_smile.pdf Feel free to...

Neutral, as in I keep delta relatively small. --segv

This portfolio can be viewed as calendar spreads along with single options and synthetic long straddles. It is net +/-delta -gamma +theta +vega. My decision to have a large vega exposure is not due to the historical low in VIX, though that was a consideration. It had to do with the...

Deferred SPX, DJX, NDX, and some basket vols. Looking at RUT presently. --segv

Continuing to buy vega. -segv

--segv

I think its supply. It has been very easy to buy. Also vols are certainly off in the constituents I own. -segv

Not quite. Statistical volatility could equal or exceed implied in any number of the positions. Not to mention dispersion. At the moment not hedging with hard deltas, I'll move the premiums around. An increase in implied volatility would certainly be preferred to gamma trading through December...

Long Dec combos across much of the DJX. I was +disp but its almost insignificant after this session, all net +gamma +vega -theta. Long other series in various SPX and NDX issues. Its all well within risk constraints, but quite painful nonetheless these last sessions. -segv

I have bought all of the vega I can afford, all that I am willing to risk. Very painful these last two sessions. -segv

Thanks Mav for taking the time to walk through the example. I was originally asking for 1 short ATM SPX combo versus long 1000 SPY shares to highlight the point that they are $risk-equivalent different payoff structures. Your point about leverage is very important, but leverage is another...