Calendar secrets :-)

[ffs1001]

Thanks Dest, but you could have written your posts in Egyptian hieroglyphics, cos they make no sense whatsoever. Funnily enough, the only posts of yours that I understand are the ones where you are calling me a fucking piker .

I see both of you have totally avoided telling me what it is that you are in dis-agreement with?

My original comment seems to cause both of your stress, but neither one of you are prepared to explain why:

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.


I have made money from cals even when the vol is falling. Apparently, that's impossible according to quant theory. You know, cos of, well, those strips, floating strikes, beeps and stuff.

A classic example was QS - a stock that literally halved from 100 to around 50 in one day about 18 months ago. The short IV shot up to about 800% and the long was about 250%. I bought cals, and literally within an hour the vols both fell and I closed the trade for almost 200% gain. The best cal trade I ever did. Of course, I wasn't expecting this much profit this fast.

But, hey, what do I know - I'm just a normie who writes in English and not in qunt (spelling mistake intentional) language.

 

[newwurldmn]

Thanks Dest, but you could have written your posts in Egyptian hieroglyphics, cos they make no sense whatsoever. Funnily enough, the only posts of yours that I understand are the ones where you are calling me a fucking piker .

I see both of you have totally avoided telling me what it is that you are in dis-agreement with?

My original comment seems to cause both of your stress, but neither one of you are prepared to explain why:

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.


I have made money from cals even when the vol is falling. Apparently, that's impossible according to quant theory. You know, cos of, well, those strips, floating strikes, beeps and stuff.

A classic example was QS - a stock that literally halved from 100 to around 50 in one day about 18 months ago. The short IV shot up to about 800% and the long was about 250%. I bought cals, and literally within an hour the vols both fell and I closed the trade for almost 200% gain. The best cal trade I ever did. Of course, I wasn't expecting this much profit this fast.

But, hey, what do I know - I'm just a normie who writes in English and not in qunt (spelling mistake intentional) language.

no one said it's impossible to make money when vols are falling. But you would rather have vols rise and gamma flat. That's the homerun.

You can buy a stock for earnings and still make money if the earnings suck because the stock rallied. That doesn't make the ideal buying stocks where earnings suck.

 

[ffs1001]

So, we are in agreement then - that it was naive of Dest to just state that we want vol to rise for cals to be profitable.

Can you kindly now explain what this all means :

in your example the vol surface has moved in root time flat (no twist). No net pnl in a 1:1 calendar as the front has less vega than the back.

Des is right, because in this event of a root time move, if the realized vol is the same, you "get back" the loss on the front, but keep the gain on the back.

 

[destriero]

QS was Dec 2020. Congrats on making $300 all in on the vol-switch. You would have made 5X your cash in the bear spread.

lol you should have bot a double calendar!

 

[ffs1001]

QS was Dec 2020. Congrats on making $300 all in on the vol-switch. You would have made 5X your cash in the bear spread.

lol you should have bot a double calendar!

LOL. Yeah, $300 is still a lot more than your woman makes working behind Wendy's.

 

[newwurldmn]

So, we are in agreement then - that it was naive of Dest to just state that we want vol to rise for cals to be profitable.

Can you kindly now explain what this all means :

Des wasn't naive. He's one of the best calendar traders I've ever met. His understanding of vol surfaces (especially single stock surfaces) is really impressive. Index as well, but there are a lot of good index guys at the banks and big funds.

Can't explain it without using the banned words or Sheldon-style math as you call it.

 

[ffs1001]

Des wasn't naive. He's one of the best calendar traders I've ever met. His understanding of vol surfaces (especially single stock surfaces) is really impressive. Index as well, but there are a lot of good index guys at the banks and big funds.

Can't explain it without using the banned words or Sheldon-style math as you call it.

No worries dude. In my 3-4 years here, having read hundreds of threads, thousands of posts by quants claiming to be able to decipher the vol surface, I have yet to see a single example - a single example, I tell you - where said quant can show a trade (historical is fine, it doesn't need to be in real-time) where they used this clever vol surface understanding and knowledge to set up and execute a trade for profit.

I've long suspected that all this clever talk is nothing but intellectual masturbation.

PS - I'll just get back to setting up my next dbl cal trade, cos Dest thinks they're great.

 

[ffs1001]

Talking of actual trades, here's my last single name cal - bought and closed on the same day for around 20%+ profit. Put that in your differential equations if you so wish.

 

[destriero]

So you made $19 per on a four lot? Nice.

Most ppl that discuss the vol-switch are referring to moves in the index-surface and are pricing the risk-reversal. I don't think for a second you know why you made $0.19 on your FDX calendar. Does it matter?

You bot it because you thought it would pin to 210 by the end of the week and gains to g/t. Mkt moved lower but (global) vols gained so you booked it same day. This has nothing to do with your vol-switch argument.

 

[destriero]

Regarding the index vol-switch in cheap stuff (deep OTM). You buy a calendar at an edge of say three handles (b23 x s26). The problem is that ATM is 20. You're explicitly long strips under the mkt. Mkt rallies, strips fall. On paper your skew helps as your fixed strike vols are rising to skew, but paid in gamma.

IOW you're losing even though you're right on strike vol. You're exchanging strips for skew and strips always win. As the mkt trades away the value of those puts in notional decreases due to moneyness. So you're right on vol (SKEW) and lose money bc the market is trading away.

If you can't find the mark at the table... you are the mark.