The reason I asked about deltas is to get approximate odds of the trade. ICs are often referred to as 10 delta or 30 delta. The Risk Reward may be good, but it's meaningless without the win rate. So I was wandering what win rate was priced in for your example. If you don't pay attention that, is this conviction coming simply from experience?
Best option strategies to learn ....
- Thread starter tradingpoker
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I often trade Condors,Flys,Calenders and to a lesser degree ratios without paying much attention to the delta's. Right or wrong,I have a view on the stock and where the option spreads should be priced based on my assumptions. Currently,I believe AAPL upside vol skew is too steep in some months,and the upside is capped at 7 percent going into earnings.
With the vol pumped,I am Delta short,but in my mind delta long.
My conviction comes from being in the game for a very long time and trading on the floor before everyone had delta sheets..
When I used to trade short gamma books it was a completely different story,as I took on positions to accommodate customers.
With the vol pumped,I am Delta short,but in my mind delta long.
My conviction comes from being in the game for a very long time and trading on the floor before everyone had delta sheets..
When I used to trade short gamma books it was a completely different story,as I took on positions to accommodate customers.
Just read any simple book on options and most of these questions will be quickly answered. ... then ask for some better books and we'll point you in the right direction.
Do you put on a trade when your view is the same as everyone else or when your view is different?
I would have to say I am a contrarian that believes in mean reversion..
Right now I am short the skew(ratioed)in AAPL on the upside and running short deltas,despite being moderately bullish. I believe 105%-108% of spot options are priced too high,and wont delta hedge my short deltas..Post earnings/vol collapse I will be long with no downside risk
Right now I am short the skew(ratioed)in AAPL on the upside and running short deltas,despite being moderately bullish. I believe 105%-108% of spot options are priced too high,and wont delta hedge my short deltas..Post earnings/vol collapse I will be long with no downside risk
The word edge is too loosely used.
I make a good amount of profits trading vertical spreads. It's how the trader trades the strategy which determines an "edge" , not the strategy itself.
Actually, reading elitetrader forums brings a wealth of knowledge that most books lack. A lot of books are the same boring gibberish, while these forums hold a lot of amazing free information. Of course there are many great books as well but the forums is where it's at.
Very true. I did take 6 months out to read every decent options book I could find, which gives a better understanding of the theoretical boring bits. I began reading all of Destriero's posts way back to his Riskarb Google+ days, and as I read the books I began to understand his and TBS trades much better. Books provide the boring theory, then forums like this provide practical trade ideas.