A complicated options trade that has helped prop up U.S. stocks is starting to unravel

I don’t think he is right about this, he doesn’t have more information than others, but he can reasonably argue using his logic.
 
Derivatives,ex trader at 2 major IB's,who has traded dispersion books..

Your statement about options and futures being cheaper is clearly from a retail perspective..

The trade is supposedly a dispersion trade,which IMHO was poorly explained



mervyn said:
what do you trade?
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taowave said:
Wait..Wut??

Buy calls in the Magnificent 7,sell SnP calls to offset the cost,and then they hedge their short position in SnP with long shares of the same 7 stocks to offset the risk????

That's one interesting dispersion trade...

Did I read it wrong??
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I don't get it. This Kramer guy is a bot.

They are long SN calls, short index (form of disp).

They are also long SN spot to hedge? Hedge what? How much size, inter-mkt could you possible commit to something this stupid?

Spooz vols have dropped more than components, absent earnings-crush.

This dude should run away. Go off the grid. New identity, wig, beard, etc.
 
mervyn said:
options and futures are cheaper to trade.
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You can trade SPX vol for $0.5 per side. 100 index multiplier.

ES vol is going to run at least 1.5 per side. 50 index multiplier.

Please check my math, but I think $3/side is worser.
 
This dude made all of this sht up on the fly. It's not even a trade. Practically, dispersion (done right) is massively constrained as it's hyper-inefficient and really only done on huge books at places like CIG. Large MMer books.

He reminds me of the guy in Blackhat (movie) that runs a FCM, "they traded Soy" (said nobody, ever).
 
Article made zero sense

destriero said:
This dude made all of this sht up on the fly. It's not even a trade. Practically, dispersion (done right) is massively constrained as it's hyper-inefficient and really only done on huge books at places like CIG. Large MMer books.

He reminds me of the guy in Blackhat (movie) that runs a FCM, "they traded Soy" (said nobody, ever).
More...
 
taowave said:
Article made zero sense
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I can't believe it.

Long dispersion is short index vol/long component vol "street" vol.

One of these guys is r*tarded.

You buy SN-vol and yeah, you can gamma-trade the vol with spot, as you're locking in excess returns over the SN/index vol-switch(swap) or whatever. The index side is generally passive unless you're reducing bc you're booking SN gamma or reallocating.

Once on it's a gamma-trade / vol.

You're BUYING shares when you're already long SN calls? Literally nobody would do that. You go from replicating index at edge to a Texas hedge? I could see shorting spot to effect the long straddle on stocks to protect your index puts/flatten delts.
 
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