best ways to go long/short volatility...

Quote from atticus:

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.
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i hear what your saying... at the end of the day.. your either short or long volatility, and you have some net gamma exposure... no super positions.. no fucking magic.... i hear ya.. one day i'lll have to hit dinner with you and Donny Bright...

its not a sound argument.. because i don't know what i'm talkin about.. alot of how i learn is plastering out what i think and then listen to peoples criticisms.. hoping they make some sense.. because you might get the whole "just buy a call" comment haha. ladders seem like something you would do if you HAD to pick different strikes.. otherwise what your saying makes complete sense.. and really when would you HAVE to pick different strikes? never
 
Quote from cdcaveman:

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
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MMers look to the pure arbs first; combos; conversions/reversals, boxes and on tenor(rolls). Then they will look to trade in industry correlations (broad term). How much effort do you think they apply to arrive a tradable correlation figure? I would think the hardware alone would make you shit yourself. My point is that if you want to be a MMer than you need to either:

1) Develop some automation in COB/complex order books
2) Get a job at a MMer, because the barrier is very high.

The barrier to entry is not in brains but in capital. If Citadel has a massive inter-market book then what does that say about single-name MMing and arbitrage? Low hanging fruit?
 
Quote from cdcaveman:

i hear what your saying... at the end of the day.. your either short or long volatility, and you have some net gamma exposure... no super positions.. no fucking magic.... i hear ya.. one day i'lll have to hit dinner with you and Donny Bright...

its not a sound argument.. because i don't know what i'm talkin about.. alot of how i learn is plastering out what i think and then listen to peoples criticisms.. hoping they make some sense.. because you might get the whole "just buy a call" comment haha. ladders seem like something you would do if you HAD to pick different strikes.. otherwise what your saying makes complete sense.. and really when would you HAVE to pick different strikes? never
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I'm just trying to save you some time. I'd take a good directional setup in vol over an attempt to capture a few bp in vol, any day.
 
Quote from atticus:



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.

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short where exposures are reduced in convexity = to me means.. your short the atm.. in a concave but contained way..
here convexity is a matter of perspective . convex to the buy.. concave to the seller.. or as you like to put it.. +/- convexity

. and we are a seller of convexity "at the money" and concavity changes to convexity in the wings so you don't get beat on large devations in the underlying..

i never talk with anyone about these things except for in these forums.. and the only time i've heard Concave talked alot about is in Taleb's books.. he uses Concave alot... but its the same fucking thing -/+ convexity.. concavity convexity...
 
Quote from cdcaveman:

short where exposures are reduced in convexity = to me means.. your short the atm.. in a concave but contained way..
here convexity is a matter of perspective . convex to the buy.. concave to the seller.. or as you like to put it.. +/- convexity

. and we are a seller of convexity "at the money" and concavity changes to convexity in the wings so you don't get beat on large devations in the underlying..

i never talk with anyone about these things except for in these forums.. and the only time i've heard Concave talked alot about is in Taleb's books.. he uses Concave alot... but its the same fucking thing -/+ convexity.. concavity convexity...
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It means the exposure to gamma is concave ATM. Greatest exposure peaks ATM and is negative to convexity and therefore the gamma curve is a frown. I am not trying to be abstract.
 
Quote from atticus:

It means the exposure to gamma is concave ATM. Greatest exposure peaks ATM and is negative to convexity and therefore the gamma curve is a frown. I am not trying to be abstract.
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i see... i've looked at the gamma graph on a chart.. it does actually look like a frown.. i got mixed up in thinking of profit graphs..
 
Quote from atticus:

The barrier to entry is not in brains but in capital. If Citadel has a massive inter-market book then what does that say about single-name MMing and arbitrage? Low hanging fruit? [/B]
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What about low volume options? Can the small guy compete there? Or is it the risk of getting picked up by an informed trader (I'm thinking of smaller companies/currencies/commodities etc where less public info is available) and the illiquidity risk too high?
 
Quote from kapw7:

What about low volume options? Can the small guy compete there? Or is it the risk of getting picked up by an informed trader (I'm thinking of smaller companies/currencies/commodities etc where less public info is available) and the illiquidity risk too high?
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If you want to babysit them. Sit a penny off and hope you get filled. I don't see any advantages to trading low volume unless there is a exploitable skew.
 
I am wondering if flies are really the best way to go long/short volatility. Have a look at the attachment I have a question for you volarbs!

Is short butterfly a pure LONG volatility play?
 

Attachments

If you are going to be long volatility why would you cap your gains with a butterfly?

vol and delta are definitely correlated. Especially in index where gap ups are less common.
 
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