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sorry, i misread your postions - it appears you are short front gamma and long june strangles a 1:1. Out of curiosity, why did you do them in this ratio?

Are you hedging your delta or just owning nekked straddles?

I will start right away with the following thought on the skew trades. Personally, if i see the market slowly trending in any particular direction, I like to buy ATM and sell the skew there. E.g. if the bonds are going up as they are doing now, I would be short higher strike calls against buying...

So, here we go. The idea is to discuss general analysis methods, possible structures to look at, maybe even exchange code and spreadsheets. Given that we all trade different asset classes and look at the world differently, I think it's mostly fine to exchange views on specific trades if there...

I started a new thread for vol discussions, so lets move over there...

Yessir. Ok, my market is closed so I am gonna take a stab at opening a vol thread.

Short spot vix (the index itself, which is nothing but a fair variance swap), not futures (which are forward variance). My original suggested "test" was to use VIX index to figure out fair variance and test it against the realized variance in S&P.

I, personally, do not like to get involved in anything below 10 delta - definitely not a seller and usually not a buyer. It's not that you can't value them, it's that as a buyer your Sharpe is going to suck, while as a seller you stand a risk of a ruinous loss. I do think that one can...

Yeah, he must have learned from his first foray into "black swan protection", which he had to close down after four year, even Sep 11 did not save him. Overall, from what I heard from our IR person, pretty much all tail protection funds did lousy last year, I will get more color after the...

Well, so in a few years he's gonna be down 50 and close the fund down. Then, he will write another book and open a new fund. On the back of any condom package it is advised to change a condom before new intercourse. He must have read it.

Sorry, i am being a bit dense here. The original test was to sell vix (which is ATM variance swap), so you are short gamma across all strikes. If you have the data for ATM 1m month implied, there is a gimmic oto get SK10 (or whatever skew measure you use) from VIX and that, if that's what...

Yet at the first glance it's unclear if you are just increasing your beta or actually extracting alpha from the market in this strategy. I was just going to throw out this strategy to make people think a little bit. One could think of other "systematic alpha" strategies that make you even more...

Yeah, an investor also has a very different utility curve. Here is an interesting strategy to ponder upon. Imagine that you have a 100 dollars and a single SPY is trading at 130. You sell a put struck at a 100 and put you 100 into an interest bearing account. If the put expires you just...

70% edge on a sample of 120 months is just as "un"-glaring as 1% on a sample of 1000. This is becoming an increasingly academic discussion on low probability statistics. There are many thing people can do to evaluate statistical qualities of outer tails in distributions and there is a lot of...

Forget about options spread, lets take much simple example - people who do event-driven arbitrage. They have a fairly small sample to work with yet somehow they are confident that the strategy has a statistically significant edge. E.g. a guy who does month-end-extensions in bonds would probably...

But of course. If you have the distribution of returns, a bootstrap test (for example) will tell you if your strategy is actually statistically sound even for a fairly small sample size. For a 100 years of S&P data where you generate overlapping N-day returns, you would not even need that.

Well, considering that these people are probably trading something 20ish-10ish delta, it does not take that much data to price these options. A simple spreadsheet doing a historical payoff back-test with ATM vol rescaling would give you a reasonable idea if you are doing well or just deluding...

I would rather wait for someone to start one, not sure what exactly would be of interest to people.

It would have been a great idea about a month ago when I was at the hospital and was bored out of my mind. Now its a bit harder since I am back to work and have to actually trade and research new trade ideas. How about we just open a pure vol trade thread and keep chatting about it? Does not...

You have to be anal about maintaining your book and maintaining a variety of record-keeping. Even if you do something stupid like selling low-delta options, you could understand the risk pretty well by looking at a variety of slides and scenarios. One of the things I did not like in this thread...