Buying Naked Calls

[destriero]

You are right that at expiration, vol is historical vol. On each trade, I am at the mercy of luck but over hundreds of trades, if I have positive expectancy probability will be my friend, it will all even out

Vol at expiration is zero.

 

[ironchef]

Vol at expiration is zero.

Yes I stand to be corrected.

 

[ironchef]

Gold. Correlation can change.

Thanks a million.

 

[destriero]

lol he's talking about OTC, swaps, arbitrage.

I've personally busted OTC dealers in digitals and exotics. I trade thousands of contracts in vanilla equity arbitrage each year. Think boxes. I have traded swaps professionally.

This ravar clown thinks a long call is short vol. Enough said.

 

[Baozi]

Look into synthetic relationships. It's important w.r.t. edge loss when choosing an equivalent OTM spread vs. choosing something ITM. Critical when valuing stuff that trades scarcely if at all.

@destriero can you briefly elaborate on the concept of "edge" ? I think that this is the most abused term ever, and probably every retail trader in his head has a different concept of it. How is edge defined/quantified in the professional space?

 

[destriero]

@destriero can you briefly elaborate on the concept of "edge" ? I think that this is the most abused term ever, and probably every retail trader in his head has a different concept of it. How is edge defined/quantified in the professional space?

In this context it's the edge loss from trading the deep ITM in lieu of the OTM (equivalent). You're looking at a bear call diagonal at a 14.5 debit (20-wide) but it's deep ITM so you trade the put diagonal (OTM) at a 6 credit.

The NBBO mid may reflect a 0.50 edge loss on the call due to being ITM as flow is always OTM.

 

[Overnight]

1. So what is non correlated to SPX? US currency, Japanese/US$ pair, R.E...?
...

That query above caught me by surprise. SPX, SPY etc etc. It all equals the S&P. So ask yourself, what is "not-correlated" with the SP index? Think in futures terms... What is "not correlated" with the ES? Well, many things! As Dest suggested, gold is one, on occasion. But there are a plethora of others.

How about bonds? In normal times, bonds and stocks are inversely correlated. Bonds go up, stocks go down. Bonds go down, stocks go up. A very loose relationship lately, yes.

SPX vs. Yen would be a similar ideal, as the Yen is seen as a safe-haven swap between stocks and currency.

And then there is the loonie. For some reason CL and the loonie are correlated. So maybe there is connection between those two and the SP? Direct? Inverted? I dunno', just look at the charts!

And trade in futures!

Options are insane. Teehee.

 

[destriero]

Guys... it's all about periodicity. Having non c0rrelated option POSITIONS in diffent periods.

 

[Overnight]

Guys... it's all about periodicity. Having non c0rrelated option POSITIONS in diffent periods.

So buy lean hog call 90 days out, and buy palladium put expiry next week.

I am darn sure they are not correlated, and those are different periods. Do I win a cookie?

(Of course I am messing with the thread here, because I enjoy the insanity of this all. It keeps me sane. Mostly.)

 

[destriero]

So buy lean hog call 90 days out, and buy palladium put expiry next week.

I am darn sure they are not correlated, and those are different periods. Do I win a cookie?

(Of course I am messing with the thread here, because I enjoy the insanity of this all. It keeps me sane. Mostly.)

Arbitrage!