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I have a general understanding of how margin works and have historically just focused on my excess liquidity and SMA balances to make sure I am in the black. But can someone help me understand a couple of things? In the example below I have ~$20k in short box spreads and about half of my assets...

I guess another question would be, would my broker automatically label it a wash sale? I am not sure if they do that for individuals who do flips of VOO and SPY for example. Maybe its all up to the individual for identifying "substantially identical" securities.

Does anyone have any strong opinions on here as to whether these two ETFs are considered "Substancially Identical" for tax purposes(wash sales)? One is short(SVXY) and the other is long(UVXY). One is .5x levered and the other is 1.5x levered. They track the same index, but in different ways...

Tao, thanks for posting this research. Goldman laid it out nicely. I would be curious to know how much of those returns come from the interest on 1m treasuries that the collateral is being invested in. If selling 20D puts only resulted in a 5% return, when t 1m was ~4% for at least half of this...

If I wanted to compare IV skew of OTM calls and OTM puts, what would be a fair comparison in regards to moneyness? Given BSM deals only with log returns, simply comparing a 5% OTM call with a 5% OTM put would not be correct. So I am guessing it would be one of the two... 1. 30D Put vs 30D Call...

So institutions don't hit bids far OTM to take advantage of the IV skew because the gap risk is simply too high?

Thanks for the reply! All this is great info for me. I am really just trying to find the most efficient way to "sell insurance" as part of my portfolio. If I come across as trying to find the holy grail of option trades, I am not. I believe markets are extremely efficient, but with that comes...

tbh I am going off academic work on the volatility risk premium, which is why I have not done any back testing. Any advice on the best way to back test ideas?

Because I am looking at returns over the long term. I understand on any given day, month, year things could get really bad. This sort of a strategy would be a very small part of my account.

If I am understanding you, you are just saying there ends up being more potential convexity in your vega position as you go farther OTM, right? Which is why they are more richly priced. As with any other insurance selling, I would assume though that the sellers are being MORE than compensated...

Very interesting. I realize as prices fall vol will rise and the option sellers need to be compensated for this risk. Is this what you are saying? So if one were to systematically sell 50 delta puts and 10 delta puts, the 10 delta puts wouldn't be more profitable despite nearly always being...

Can you elaborate? My initial point was asking why market makers wouldn't sell vol far OTM to capture higher IV. If they are hedging delta I don't understand why you would want to sell at lower IVs(selling options ATM). Is flow entirely dictated by large buyers and not large sellers?

Thank you all. This might be true, but spreads don't use too much margin so its mainly the surplus naked puts at ~15% margin that would be the issue. An example as of today would be for Jan 17th expiry, buying 1 $323 put at 10% vol and selling 4 $305 puts at 17% vol. Delta is close to 0 and...

It would seem to me managing ratio put spreads in a delta neutral strategy would be the smartest/easiest way to systematically "sell insurance" to the market, while taking advantage of the skew. For example, buy 1 $320 SPY put paired with selling 2 $310 SPY puts. Is this a popular trade...

So I assume leveraged risk parity requires(or much prefers) a steep yield curve to be effective.

I found a Bionic Turtle explanation. It was as I expected. The yield the futures holder "receives" is built into the discount that is applied to the forward price. I probably just didn't ask the question clearly.

But if you own the bond or own the future, you are at risk of price change in both cases, so i don't quite follow, sorry.

Future pays no interest, but is discounted by the coupon payments, so you are still getting the coupon in other ways. Is that wrong? While I am not trying to do levered risk party via futures, I am trying to understand it. Whats so advanced about buying bond and equity futures? How is it...

Thanks Robert and sle. It appears you guys are saying two different things. Robert, you seem to be saying you will not capture any of the yield embedded in the 30yr bond, which doesn't seem right. If the majority of the cash/future basis is based on financing(risk free rate?) and the coupon...

Thanks for all the help all. I was thinking more on this subject. In trying to lever bond exposure, it seems there would be a problem with the cost of carry. Please correct me if my logic is wrong. Lets say I wanted $3mm in bond exposure with $1mm in cash. If I bought $3mm worth of 30y bond...