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That's what I've found as well. If we have to derive the borrow rate from put-call parity but the spreads are very wide, how do we get a good idea of where the true mid should be?

Sle, I've been getting borrow rates for stocks using put-call parity, mostly because I don't know how to do it another way. Is there another way to get that information?

Here's a list of some of the possible ways to take a directional opinion, from what has historically worked best to the historical worst: Selling front-month out-of-the-money options (in limited quantities) Selling front-month at-the-money options (again, in limited quantitites) Buying low-beta...

That image doesn't show which futures contracts are being used. If they're near the back of the term structure (3 months or more from expiration), then the answer is probably yes. Keep in mind that front-month futures and longer-dated futures don't have to move in lockstep, so the spread can...

It's usually a good idea to avoid buying out-of-the-money options, as they are usually simultaneously overpriced and very sensitive to changes in implied volatility. One way to take advantage of VIX at these levels is to buy an ETF and sell OTM calls against it if getting delta exposure is more...

VIX options tend to have very slow decay until about a month before expiration, and then the decay increases rapidly, eventually becoming more pronounced than it would be for normal index options. The further out of the money the options are, the worse the decay tends to be. The move in the...

Here's a pretty readable book on options. It's probably a good idea to read it from cover to cover and then return to the forum to ask more questions.

Generally, I have positive theta, as selling options works very well. There are also options that are worth buying that don't suffer same kind of adverse decay as the options most of us are used to selling. It's also possible to construct a long volatility strategy using trend-following rules...

My own: 1. I don't do anything unless it's supported by academic research. 2. Once I've found evidence that something works, I'll look hard for evidence that it DOESN'T. Does the strategy fail in other markets or in time periods I haven't considered? 3. If there's contradictory evidence, is it...

As a liquid alt, the trade has better diversification characteristics when it's put on with no delta, but that's probably too complicated to explain in a PowerPoint presentation.

I had friends selling their rental houses and buying gold in early August 2011. They were close to the top in gold and the bottom in the housing market. GLD implied volatility back then was about three times what it is today. Now I've seeing people who have no money and even high school...

It sounds like you're buying SPY, shorting a call, and shorting enough futures to eliminate the delta risk of the overall position. If that's the case, you've synthetically constructed a short straddle. There's no delta risk when you put the position on, but that changes after a few minutes...

A lot has been published on what happens to the short vol trade when VIX is low. For example, take a look at this paper from AQR: Still Not Cheap: Portfolio Protection in Calm Markets https://images.aqr.com/-/media/AQR/Documents/Journal-Articles/JPM-Still-Not-Cheap.pdf The takeaway is that...

VIX calls are tied to the price of the corresponding futures contracts rather than to spot VIX, so you have to determine whether you have any edge in buying the calls (1) based on the expiration of the futures/VIX options contract you choose, (2) based on the level that future is trading at, and...

AQR has another paper that looked at option returns more comprehensively through the lens of the leverage embedded in the contracts. They found that the persistently negative returns described in the paper we've been talking about apply to options with higher leverage (percentage change in the...

I took a quick look at the paper just now. As usual, AQR approached the problem from several different angles in order to see if they'd reach the same conclusion (they did). They only test front-month index options, though. (As far as I can tell, when they use the term equity option, they mean...

I never want to get a margin call, but if I did want to take the risk, I would probably want to trade a massively profitable strategy like leveraging up deep out-of-the-money short strangles on the S&P 500. That would generate reasonably sized, steady returns for YEARS (until - one day - it...

There are different kinds of tail moves, and they can't all be hedged the same way: 1. Large, sustained down moves in the market (2000-2, 2007-9) 2. Large, sustained up moves in the market (2017 and Jan 2018) 3. Sudden down moves in the market (1987) 4. Large implied volatility spikes that...

Yes, using the short put instead of long stock should work a lot better. I have seen a paper about this but haven't had time to read it yet: Momentum and Covered Calls Almost Everywhere https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2921778 From my brief look through the paper, I would...

The easiest way I've found to do it is to go to CXO Advisory and use the search box: https://www.cxoadvisory.com/ The studies you'll find tend to be limited in scope. For example, that "Collaring the Cubes" study picked a time period that contained two bear markets and used the sector of the...