Calendar secrets :-)

[newwurldmn]

Do the math, the surface has twisted in root time.

Anyone whose trades anything ever knows that markets can reset in a few min including an entire vol surface. That doesn’t take reading a quant book to see that.

Edit: are you saying you have the brain of a bumble bee? Because you are acting like it. It’s me now asking you to show something for me to take you seriously. Strike one is that des clearly doesn’t.

Reading quant books is one thing and actual,real life trading is another. Your post is like a physicist showing differential equations and advanced level maths to a bumble bee, telling it, that according to science, the bee cannot fly, and the bumble bee simply smiles, says "Yeah sure" and wizzes off into the air.

There are traders, including myself, who regularly trade calenders during FALLING vol (post-earnings) and closing for a profit cos the short iv has fallen much more than long iv.

The root time square vol hexagonal vomma trangulated shadow gamma sticky surface etc doesn't come into the equation cos the trade is closed within minutes.

But others can trade cals the way it works for them. To each, his own.

 

[ffs1001]

Do the math, the surface has twisted in root time.

Anyone whose trades anything ever knows that markets can reset in a few min including an entire vol surface. That doesn’t take reading a quant book to see that.

Edit: are you saying you have the brain of a bumble bee? Because you are acting like it. It’s me now asking you to show something for me to take you seriously. Strike one is that des clearly doesn’t.

Quite frankly, I don't give two hoots whether you take me seriously or not. You talk the same gibberish as he does. Oh....and you kissing Dests butt in public is not a good look. Your self-esteem must be super low if you need the approval of another.

Getting back to calendars, do you think that calendars can only be profitable in a rising vol environment? I don't. I've traded them for years in scenarios where the vol falls.

That is what I am debating here. And pls don't go into the root time square nonsense. That doesn't impress anyone.

 

[newwurldmn]

Quite frankly, I don't give two hoots whether you take me seriously or not. You talk the same gibberish as he does. Oh....and you kissing Dests butt in public is not a good look. Your self-esteem must be super low if you need the approval of another.

Getting back to calendars, do you think that calendars can only be profitable in a rising vol environment? I don't. I've traded them for years in scenarios where the vol falls.

That is what I am debating here. And pls don't go into the root time square nonsense. That doesn't impress anyone.

I’m not trying to impress anyone. if you don’t want to discuss root time vol then there’s no discussion about calendars. That’s like saying you want to discuss the weather but we can’t talk about the sun or the clouds.

 

[ffs1001]

I’m not trying to impress anyone. if you don’t want to discuss root time vol then there’s no discussion about calendars.

And therein lies the problem. There's an expression along the lines - a carpenter tries to solve every problem with a piece of wood. Your quant, nerdy, Sheldon-like mind-set cannot relate to the practicalities of trading calenders. Tunnel vision at work.

You seem to have said a lot but nothing relating to what I originally wrote. In fact, i don't even know what it is you are arguing about anymore.

What is it that you don't like about me saying " cals don't necessary need rising vol to be profitable."?

 

[newwurldmn]

And therein lies the problem. There's an expression along the lines - a carpenter tries to solve every problem with a piece of wood. Your quant, nerdy, Sheldon-like mind-set cannot relate to the practicalities of trading calenders. Tunnel vision at work.

You seem to have said a lot but nothing relating to what I originally wrote. In fact, i don't even know what it is you are arguing about anymore.

What is it that you don't like about me saying " cals don't necessary need rising vol to be profitable."?

You are literally the first person to say i have a "quant, nerdy, Sheldon-like mind-set." When you get past this childish notion, we can have a real discussion.

For what it's worth, i stopped trading calendars to cross earnings events long ago. I opted for a better structure - and it's not because of some quant model but 20 years of practical experience.

 

[ffs1001]

You are literally the first person to say i have a "quant, nerdy, Sheldon-like mind-set." When you get past this childish notion, we can have a real discussion.

For what it's worth, i stopped trading calendars to cross earnings events long ago. I opted for a better structure - and it's not because of some quant model but 20 years of practical experience.

I have been TRYING to have a real discussion with you - but you cannot seem to do it in a language that normal, non-autistic people can understand. I am genuinely open to new ideas and thought.

And you have avoided answering my question multiple times. All you do, is try to act knowledgeable and "clever" my using un-necessary terminology. This is why you come across as Sheldon. You are either purposely avoiding answering my question or your social skills are severely lacking.

Do you care to respond to my question in my last post? Once again, ill type it here:

"I believe it is naive to think that you need rising vol to profit from cals. They can be profitable in a falling IV environment too as long as the short vol falls much more than the long vol".

Do you disagree with this?

If so, pls clarify why - in a human readable language - and i'll be prepared to have a proper discussion. Did you notice how readable the above quote is? If you can respond in a similar manner, then I'll be the first person to give you a 'Like'.

 

[d08]

Anybody else discovered an important "secret" with calendar spreads?
Maybe too good to be true
I'm still researching it, but what I think I've discovered is maybe just an old hat for some others

I'm sure someone will discover the money printer in options but you can relax your mind with the knowledge that it definitely won't be you.

 

[newwurldmn]

I have been TRYING to have a real discussion with you - but you cannot seem to do it in a language that normal, non-autistic people can understand. I am genuinely open to new ideas and thought.

And you have avoided answering my question multiple times. All you do, is try to act knowledgeable and "clever" my using un-necessary terminology. This is why you come across as Sheldon. You are either purposely avoiding answering my question or your social skills are severely lacking.

Do you care to respond to my question in my last post? Once again, ill type it here:

"I believe it is naive to think that you need rising vol to profit from cals. They can be profitable in a falling IV environment too as long as the short vol falls much more than the long vol".

Do you disagree with this?

If so, pls clarify why - in a human readable language - and i'll be prepared to have a proper discussion. Did you notice how readable the above quote is? If you can respond in a similar manner, then I'll be the first person to give you a 'Like'.

"normal, non-autistic..."

hmmm.... if vol goes down for tomorrow, a 1 day option will go down more than a 10 year option. does that make sense? you can quantify this but it requires the mathematical skills of an autist to do it (or at least a first year college student)?

You need vol from the front to come down more than the back. the front can come down via gamma (des's point, or the present value of the gamma (via short dated implied). it has to come down more than this mathematical relationship we are not allowed to discuss because only "dem is big words." So we won't delve into this much more.

There are nuances which if you understand can generate a tremendous edge when the opportunities arise - but they aren't common. But this truly the realm of quants who watch the vol surface (pretty complicated for a "normie").

As i said, i figured that calendars are generally not a good way to trade this drop in implied vol that you are monetizing, but i'm not allowed to talk about why because it's like AP Statistics math.

 

[destriero]

This is a naive and simplistic view. The reality is that cals are a little more complex than that. An increase in general market IV normally results in the short IV increasing much more than the long IV.

What we want in the cals is not vols to rise, but

1) long vol to rise more than the short vol
2) or short vol to fall more than the long vol

We are trading the IV differential between the two.

lol ignoring gamma? Let's assume that vol (strips; VIX, VOLQ) is negatively correlated to (index) price. You're implying that you're long the vol-switch; short front, long back, 1x1. You're long vega.

100 beeps in the 1W ATM SPX call is worth $3. SPX rallies 10 and the call gains $5. You're long the ATM calendar and you're getting shorter and your strikes are under cash (index). Floating strikes are dropping (negative corr) but you're strikes are under the mkt so they are now skewed. Ideally the surface tells you that fixed strike vol is inviolate. Your strips are dropping, yeah? The entire surface falls like low tide? But your fixed strike is trading = (vol) because it's now trading under the mkt and a source of flow (hedging). IOW the vol is conveniently unch even though strips have fallen.

You are long vega but strips are dropping. The fact that you paid for the calendar tells you this. So you're long vega and mkt is moving away. You don't want that. Absent macro, the expiring series increases in vol as time pass (synthetic vol as time). Look at any series with a 1DTE.

Ask any pro about the use case for calendars. You're not making any fucking money trading post-earnings. The reset occurs with the first tick.

Further, don't trade the vol-switch. And please, for your kids, don't trade it pre-report and hold through earnings.

Long vol, long delta when there is a solid risk-reversal figure. Unimodal bear diagonals hedged with futures or spot. You like those because the vol-position can't flip deltas when you blow through the strikes.

If you're trading cals into the switch, post earnings, then that use case is dumber than your ATM double calendar. Don't trade RT-neutral as you'll blowup. Here's a pic of this week's NDX ATM.

 

[destriero]

The long-switch (Svol1/Lvol2) is not making you any money outside of pre-report divergence. The Street assigns a fixed premium figure to the post-earnings move so the implied is the variable. That’s why the switch blows out before the report. Vols trade top decile so you never hold a calendar through the report even if you’re inside and know where the shares will trade. There is simply no worse position to hold (1x1).