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i also follow a strategy of "buying the probability curve".. i figure if skew is essentially a mean reversion to neutral at expiry, and the "edge" you're expecting to capture is essentially the spread between the skewed and neutral volatility curves, then instead of running something like a...

what we're doing now is a combination of skew as mean reversion and skew as a directional assumption.. we're definitely heavily focused on maximizing number of occurrences as well.. as for the intricacies, i've definitely been flying thru those...ergodicity and non-ergodicity, fat tail...

so, i'm not thinking of opening trades as butterflies.. i'm considering opening trades, and then converting them to risk-free butterflies if the stock moves in my direction.. not a big fan of butterflies as a stand-alone trade.. i also arrange my trades such that max loss is impossible -...

next time you're looking at an index look at the prices for a call and put equal distance from the stock price.. in a perfectly efficient and neutral market, they would cost exactly the same, but you'll find the puts cost more.. in other stocks, especially HTBs and tech stocks around earnings...

it depends on the volatility skew.. if there is put skew - i.e., indexes and most large caps - then selling OTM puts will give you a long term mathematical edge because of the pricing discrepancy between the selling price and the theoretical expected value.. options are priced based on...

perhaps i'm misunderstanding something here, but in this case, why exercise the contracts? wouldn't you be better off a) closing the puts for a profit, b) selling the long calls for a profit, and c) using the combined sum to pay the cost of closing out the naked shorts? the math should put you...

stock where calls are overpriced is known as positive volatility skew (or call skew).. there are much, much, much better ways to take advantage of that besides just selling the calls.. instead of just selling a 35 delta call, also buy the 80-90 delta call, to form a vertical call spread.. IF...

if you're gonna just buy options and look for high leverage, you need to look at volatility skew and combine that with your directional bias... put skew = puts cost more than fair value and calls cost less than fair value, so if you buy a put or sell a call the odds are stacked against you...

that definitely makes sense.. it's a little tricky figuring out how to manage spreads that are doing the opposite of my overall account - if the portfolio is green, does management start with winning or losing trades? or if it's red, same thing.. still wrapping my brain around all that! what's...

thanks for the tip about vol weighting.. that's been one of the things i kind of intuitively have been leaning towards, the idea that position sizing needs to be vol weighted, and that trades should be managed once they hit whatever threshold i've set.. thank you for that! to the second part...

a friend of mine pointed me to one of dest's posts about a month back and i learned a LOT from him, so most definitely! i'll check out same laze element as well.. appreciate ya!

Hi, I'm new to the forum, but I've been exploring the world of trading volatility skew for a short while now. This led me down the road of the Kelly criterion and traders such as Ed Thorpe, Blair Hull, Nassim Taleb, and William Ziemba. I started out trading modified vertical spreads in...