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for example: I want to own 1 March ES 1510 call and write 1 March ES 1510 call at the same time, without those positions netting each other out. The impact on open interest from my trades should be +2, not 0. Is this possible? Is there some terminology for this?

Ok I think I am beginning to understand. Would another way of saying this be: the IVs from the call and the put are not fungible. In an extreme case where the underlying falls significantly the overall position is reduced to being short the 90% put and delta-hedging, which is why you lose money...

I don't understand why in this example you lose money if realized vol is higher than 21.5% and make money if its lower. I see how that would be the case if you had sold both options, but since you are buying the 100% strike and selling the 90% strike shouldn't you be neutral to realized vol? Say...

Ok sure. I guess my core (probably naive) question still stands though. Realized volatility has to be 1 number between the time you open your trade and expiration: say 15%, 25%, 50%, etc. Doesn't this mean the skew at expiration must be 0? There is no such thing as "realized put vol" or...

ah ok a delta-hedged risk reversal is exactly what I am looking for. I used the vertical spread example because I didn't know if there was a term for buy OTM call, sell OTM put. my question still stands though: assuming you can delta-hedge perfectly and continuously to expiration (so you are...

I think you misread? My example uses puts, so the $95 Put is OTM and the $105 Put is ITM

Please help me understand the flaws in this strategy. Let's say there is a significant amount of put skew. Underlying is currently at $100. $95 Put is trading with IV of 20. $105 Put is trading with IV of 10. So you put on a bear vertical spread and delta-hedge with the underlying to...

oh man I wouldn't be surprised if ppl were just "arbitraging" the difference between var and vol swaps where they are struck thinking they were picking up free money without realizing they were selling convexity, since vol really didn't go anywhere for several years pre-2007 sle I have been...

sounds like you've been doing this a long time do you have any specific examples of things not behaving as you anticipated / markets going bidless/offerless?

I'm looking for some leads on interesting behavior you guys have experienced/witnessed over the years.

Yes that is the method I use. At the beginning of the year I have $X in the trading account and $0 in the cash sweep account. As I accumulate profits I calculate my DD and sharpe based on the combined value, on a daily basis. That 60% DD was a real drawdown that chewed through about $3X of the...

The return is pretty arbitrary, dependent on leverage, but mac asked for clarification so I gave it.

So I still consider it 850/60 instead of the 85/6 njrookie proposed. I start out the year with $X in the trading account and $0 in the separate cash account. As I build profits I'll sweep them out into the cash account, and when I have drawdowns I'll sweep the other way. But if I have...

I am capacity constrained which is why $P/L matters more than percent return. In terms of position sizing, I try to keep a minimal amount in the account to max out my margin at the point where the capacity constraint starts kicking in. I prefer trading this way because every time drawdowns occur...

That drawdown occurred on profits, not starting equity. I start at 0 every year and keep tight risk limits, but if I'm doing well I'll relax those limits and swing harder.

850% pct return, 3.5 Sharpe, max DD of 60% I expect 50% DD, so the 60% this year was...uncomfortable. sellindexvol: i understand why it's necessary to post a screenshot with numbers to get rid of trolls and daydreamers, but there's no need to flame on Mac, especially after he posted a...

what return on equity is that macintash? also if you have some risk numbers i'd be curious about that as well. i'll post some numbers at year end as well...2nd half has not been great only up about 70k vs. 340k in first half of year

what are your risk stats, Sharpe, max drawdown, etc.? 30-40% in a vacuum is meaningless without some understanding of risk. It sounds like you have a solid technical background but weak in statistics/risk management. As others have advised you need to trade it to get real results. I think...

oh of course i would LOVE to be in a position to issue these things. I'm sure the issuers make out like bandits. If they were able I'm sure they'd issue 10x levered volatility ETNs. aaaaand its gone! http://www.youtube.com/watch?v=NmFo-LKHGY0&feature=related

imo there are too many uncertainties in VXX/XIV to go long or short if you go long you are implicitly short barclays credit risk because if VIX really goes up a lot you know barclays will be in trouble if you go short you run the risk that ishares will halt creation units creating a...