best ways to go long/short volatility...

[cdcaveman]

this is my real question.... i've learned of most options structures and their equivalents.. granted some are theoretically similar but yet still have different attributes... IE synthetic long, Synthetic straddles,etc.. etc..

So my real question is.. considering different account sizes and risk tolerences.. what is the best way to spread... .

list of short vol structures..

Iron butterfly
call fly
put fly
short straddle
short strangle
Condor
credit spreads calls or puts
Ratio buy writes
short calenders, long calender (depending where your predicting overpriced vol)
variable Ratio writes
short guts
long ladders


my question is.. what is the real difference even if its small on using puts instead of calls for butterflys... and whats the difference with Iron butterflys.. is there much of any to consider.. even on large numbers of combos.. ? there are so many ways to pick wings.. any theory on picking wing widths? say trades that last a few days with shorter wings, or very short wings and selling the butterfly, or wide wings on 2-3 month out back month expires to reduce sensitive to gamma..
one thing i know is.. the closer to opex the more gamma risk.. most everyone knows this.. so i would think to short butterflys with short wing spreads near term.. and open up the wings with back months..
so if you have a underlying that you feel is going to make a decent move .. you want the gamma exposure and you wanna sell the fly with short wings
if you think the underlying is just finished its power move your better buying a little wider fly that has more time to it..
i imagine all these things pertain to IC's to (iron condors)

to me short strangles and straddles don't have a risk containing factor and just aren't for me.. short strangles are in effect more efficient then straight naked calls because if you get blown out on one side you have the few pennys you picked up on the other side.. haha either way i dont' like that..
another question.. whats the advantage of in the money debit spreads instead of otm credit spreads... is there any?? whats the difference if any.. why buy a DITM debit spread rather then OTM credit spread..?

now this is the question for all the people that don't just short premium/short vol whats the best structure to get long volatility.. alot of guys here i know short tons of premium.. and the first thing new retailers do is take big shots to their accounts by learning about theta when buying premium ... does anyone trade long volatility??? and how
my only thoughts for trading long vol are
short butterflys with tiny wings when the underyling is trading right at the middle strike and you expect decent changes in the underlying price
and ratio backspreads.... DOTM or ATM
so you either hedge with the underlying and trade inside a ratio backspread to get gamma neutral.. gamma scalp..
or you trade for the tail event for a huge breakdown in a stock.. IE NETFLIX etc.. with backspreads..
or you just straight buy the super deep otm puts..

other long vol structures of note:
short call ladders..
wrangles.

so if anyone actually goes long volatility.. say something please..

 

[diaoptions]

Quote from cdcaveman:

So if anyone actually goes long volatility.. say something please..

Would that not be as simple as buying calls or puts?




--------------------------
diaoptions has spoken

 

[cdcaveman]

Quote from diaoptions:

Would that not be as simple as buying calls or puts?




--------------------------
diaoptions has spoken

yes that is the simplest strategy... and obviously buying them right before expiration is counter intuitive but can be a good strategy.. sometimes people think buying back month options is a great idea but your just buying more time.. and if your paying a premium for it then your directional call has to be very right.. all your doing is buying time at the expense of reducing your gamma exposure..

 

[atticus]

Quote from cdcaveman:


list of short vol structures..

Iron butterfly
call fly
put fly
short straddle
short strangle
Condor
credit spreads calls or puts
Ratio buy writes
short calenders, long calender (depending where your predicting overpriced vol)
variable Ratio writes
short guts
long ladders

Those are obviously long vol instruments as well. Here's the dissected list:

Fly
Condor
Straddle/strangle (ratio buy-write is a synthetic straddle at 1x2)
Vertical (credit/debit is immaterial)
Calendars
backspreads (short)
Ladders
(among others)

Short guts are simply short inside strangles and are equivalent to the same-strike OTM strangle. The additional credit ~ equal to the strike width, governed by the box. Ladders are not worth the effort in anything but index (and that's arguable) as you're virtually always better off in the condor. There are times when a put ladder is valuable in the index (smile shape).

 

[atticus]

Quote from diaoptions:

Would that not be as simple as buying calls or puts?




--------------------------
diaoptions has spoken

So buy the call, vol rises and stock drops. How have you isolated vola?

 

[cdcaveman]

Quote from atticus:

Those are obviously long vol instruments as well. Here's the dissected list:

Fly
Condor
Straddle/strangle (ratio buy-write is a synthetic straddle at 1x2)
Vertical (credit/debit is immaterial)
Calendars
backspreads (short)
Ladders

Short guts are simply short inside strangles are are equivalent to any OTM strangle The additional credit ~ equal to the strike width, governed by the box. Ladders are not worth the effort in anything but index (and that's arguable) as you're virtually always better off in the condor. There are times when a put ladder is valuable in the index (smile shape).

i can't even imagine "short guts" theres obviously a reason they call it that.. it falls under the same catagory as short strangles/straddles ... flys take the cake compared to these structures..

in the long run i hope to either make markets.. or trade a large book of some sort.. and i'm sure any MM has a colorful arrangement of these structures all up and down the strike space equating to what looks like a butterfly inside a wrangle.. at least thats my guess from readings.

 

[cdcaveman]

Quote from atticus:



Short guts are simply short inside strangles and are equivalent to the same-strike OTM strangle. The additional credit ~ equal to the strike width, governed by the box. Ladders are not worth the effort in anything but index (and that's arguable) as you're virtually always better off in the condor. There are times when a put ladder is valuable in the index (smile shape).

ladders are more of a discussion of how deep in the money or at the money to sell in relation to the ratio and spread of the bought options according to how sensitive you wanna be to the magnitude of a move.. thats just my imagination speculating what would make sense there.. never traded it.. another trade similar to the wrangle/fly pattern would be to wrap the fly with the ladder to short a fly inside long ladders or vice versa..

 

[atticus]

Quote from cdcaveman:

i can't even imagine "short guts" theres obviously a reason they call it that.. it falls under the same catagory as short strangles/straddles ... flys take the cake compared to these structures..

in the long run i hope to either make markets.. or trade a large book of some sort.. and i'm sure any MM has a colorful arrangement of these structures all up and down the strike space equating to what looks like a butterfly inside a wrangle.. at least thats my guess from readings.

I don't know why you'd want to make a market in an environment where flies are often as narrow as NBBO in the underlying (I can post instances tomorrow).

MMers generally like to be short ATM, long excess OTM (long speed). You're short where exposures are reduced in convexity (concave) and long where convexity is positive.

A fly is a good representation of what MMers try to achieve in a single-name book. It's short gamma at DN and long gamma (marginally) outside the wings. All single-name MMers would run fly-dissections to manage their books. It's less a factor now as most MMing operations are inter-market across a global risk figure.

Decide what you want to be; a liquidity maker or taker. There isn't a lot of opportunity for the former, unless you want to work for Susq, Citadel, etc.

Buy flies (short gamma) and go long excess wings on the cheap. That's how I believe a book should be structured as a liquidity taker.

 

[cdcaveman]

Quote from atticus:

I don't know why you'd want to make a market in an environment where flies are often as narrow as NBBO in the underlying (I can post instances tomorrow).

MMers generally like to be short ATM, long excess OTM (long speed). It's just short risk where exposures are reduced in convexity and long where convexity is positive.

A fly is a good representation of what MMers try to achieve in a single-name book. It's short gamma at DN and long gamma (marginally) outside the wings. All single-name MMers would run fly-dissections to manage their books. It's less a factor now as most MMing operations are inter-market across a global risk figure.

Decide what you want to be; a liquidity maker or taker. There isn't a lot of opportunity for the former, unless you want to work for Susq, Citadel, etc.

Buy flies (short gamma) and go long excess wings on the cheap. That's how I believe a book should be structured as a liquidity taker.

i wanna make money.. haha Market making today does seem like it would be exactly what you say.. intermarket arbitrage.. super fast, and done by computers.. everyone that makes money has a hidden box/software.. hardware set up/ colocation ... broker relations... etc.. etc.. that they won't let anyone know about.. i can imagiine people setting up all kinds of structures to lure people into just a slight overpayment .. thats what the fuck i would do... its like you wanna look like the shits getting bid up as the big order comes in.. haha... but it seems like market making could be a fine line between liquidity taking and actual options arb... i don't know anything about this and could be talking out my ass.. i've never worked for anyone in my life.. other then customers... i can't imagine punching a clock like all the rest of the slaves... i got into trading to essentially put my brain and emotional stabilty to the test for a bet to gain my freedom from the bondage of employment.. or as i have experienced self employment.. my only experience has been theres no free lunch .. haha

 

[atticus]

Quote from cdcaveman:

ladders are more of a discussion of how deep in the money or at the money to sell in relation to the ratio and spread of the bought options according to how sensitive you wanna be to the magnitude of a move.. thats just my imagination speculating what would make sense there.. never traded it.. another trade similar to the wrangle/fly pattern would be to wrap the fly with the ladder to short a fly inside long ladders or vice versa..

You're not making a sound argument here. If you're afraid of what it will become then don't trade the ladder. There is no instance you can make to me to trade the ladder over the condor (outside of the index). If you're being paid massive skew in the ladder then you can approach that edge-figure (and greater $ exposure) in a condor. Not dumb in terms of vol-edge but in capacity. It's just a poor choice.

None of this is unknown. You're not going to structure wrangles and flies into some super position, it doesn't exist.