best ways to go long/short volatility...

sle · Sep 10, 2012

Being long vol at the wrong time is just as bad as being short vol at the wrong time. A number of people blew up last year being long all sort of risk premium (vega, gamma, var switches) - all of them were playing for the repeat of 2008. No matter how you go about it, you can get fucked. To quote:

"Those flying fish, they're not leaping for joy, they're jumping in terror. "

cdcaveman · Sep 10, 2012

Quote from sle:

Being long vol at the wrong time is just as bad as being short vol at the wrong time. A number of people blew up last year being long all sort of risk premium (vega, gamma, var switches) - all of them were playing for the repeat of 2008. No matter how you go about it, you can get fucked. To quote:

"Those flying fish, they're not leaping for joy, they're jumping in terror. "

yeah but theres really no such thing is "Neutral" your always in the water in one way or another... your either cash and bleeding from inflation, or your long or short vol to some degree.. at least thats the way it seems.. even when your not making a decision to trade you have made a decision to bleed..

marameo · Sep 10, 2012

Quote from cdcaveman:

yeah but theres really no such thing is "Neutral" your always in the water in one way or another... your either cash and bleeding from inflation, or your long or short vol to some degree.. at least thats the way it seems.. even when your not making a decision to trade you have made a decision to bleed..

Well, I still prefer bleeding from being long/short vol instead of being long/short the underlying.

cdcaveman · Sep 10, 2012

Quote from marameo:

Well, I still prefer bleeding from being long/short vol instead of being long/short the underlying.

you prefer bleeding to being long or short vol of being long or short the underlying... i'm having a hard time making sense of that?

newwurldmn · Sep 10, 2012

Quote from sle:

Being long vol at the wrong time is just as bad as being short vol at the wrong time. A number of people blew up last year being long all sort of risk premium (vega, gamma, var switches) - all of them were playing for the repeat of 2008. No matter how you go about it, you can get fucked. To quote:

"Those flying fish, they're not leaping for joy, they're jumping in terror. "

or 2009. how many people were buying vol at 60 in the SPX only to watch it end the year at like 20.

cdcaveman · Sep 10, 2012

Quote from newwurldmn:

or 2009. how many people were buying vol at 60 in the SPX only to watch it end the year at like 20.

ya it goes without saying.. there is no mean... no magical point to sell or buy vol

rocky_raccoon · Sep 10, 2012

Quote from cdcaveman:

So i look at trades on AAPL, BIDU, GS, GOOG... does anyone have parameters.. or shall i say a good filter for coming up with tickers that have good premium or should i be thinking differently? maybe is there good way to look for tickers that have overpriced premium on a regular basis? or vice versa?

I posted this setup in another thread but here is is again:

On Wed on expiration week (That's Sep 19 for this month) open next month (Oct) iron 'fly on SPY with the 5 point wide wings. The short strike (body) should be above spot price. (E.g. +140P/-145P/-145C/+150C based on today's price of 144.10).
Close within 10 trading days. Expected profit is 10% of risk (5-credit received).
I've paper-traded it twice so far making ~15% each time. The guy who showed it to me did it 30 times in a row (30 months) without any losses.

marameo · Sep 10, 2012

Quote from cdcaveman:

you prefer bleeding to being long or short vol of being long or short the underlying... i'm having a hard time making sense of that?

That's just me. I am turning to vol trading because I am sick and tired of betting on the price direction.

cdcaveman · Sep 10, 2012

Quote from marameo:

That's just me. I am turning to vol trading because I am sick and tired of betting on the price direction.

i was in the same position! the deal is .. all of a sudden you'll be trying to forecast volatility assumptions... volatility has direction to.. Gotta deal with that sick and tiredness..

marameo · Sep 10, 2012

Quote from rocky_raccoon:

I posted this setup in another thread but here is is again:

On Wed on expiration week (That's Sep 19 for this month) open next month (Oct) iron 'fly on SPY with the 5 point wide wings. The short strike (body) should be above spot price. (E.g. +140P/-145P/-145C/+150C based on today's price of 144.10).
Close within 10 trading days. Expected profit is 10% of risk (5-credit received).
I've paper-traded it twice so far making ~15% each time. The guy who showed it to me did it 30 times in a row (30 months) without any losses.

Does it have to be an iron fly? How about put-only-fly or call-only-fly?

I assume bid/ask spread plays a major role when it comes to open/close the trade. Also, commission will affect any profit/loss; say I want to trade 250 of those flies, that's $1k fees just to open the position (I assumed $1 per option).