Quote from snugglepuppy666:
for the love of PLEASE explain!!
im not completely stupid but am confused
"long some skew"
"Vols were flat in light of a 2% move in the index."
think i understand this one..but shouldnt volatility increase on a price decline?
"Magnitude saved the position, not vegas."
so its the fact that the underlying moved so much not the fact that it was an IV play? is that correct? If so what moves the vegas in a delta nutral position? iwould of thought the fed would
"Best-case was a runaway bull reaction as gains from skew would've offset losses on strip volatility -- essentially isolated to upside deltas. "
SO, a upside move of the q's would have been much more benifical? Skew meaning volatility (iv)? so the call was in a better position to gain vs the put?
what is "strip volatility"?
"essentially isolated to upside deltas."
so does this mean i was effectively long w/ a hedge?
Long some skew = 52 strike vol slightly > 53 strike vol. Downside strike vols increase as their deltas decrease -- therefore long delta = long skew in index markets.
Vols are bid into macro events. It rarely pays to buy vol into these events unless you're flattening your deltas with shares or another option series after the event.
Price moved 2-sigmas, but you inverted deltas. QQQQ started the day $.55 above your strike.
You started the day long deltas, long gamma, long skew and strips. A bull move would've accumulated more deltas -- you wouldn't have seen your deltas flip-modality; +/neutral/-, as the Q's approached/breached the straddle-strike. This [inversion] always hurts if you're long gamma. Skew meaning volatility-by-strike; and an upside QQQ move would've increased strike-vol, net of a loss to aggregate volatility [strip vol].
The position dissects to long deltas as being the leveraged win. Gammas are decreasing with vols, and strip and skew exposures offset.
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