There are still plenty of edges in options, for instance no one can actually agree what future realized volatility will be, so right there you can have an opening. Another one is structural, for instance certain market participants are directly or indirectly forced to buy puts no matter what so right there you can get another source of edge (skew). And finally (for this list of examples), in index options there is a well documented excess variance risk premium present that could also be exploited.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Delta arbitrage ?
- Thread starter K-Pia
- Start date
There are still plenty of edges in options, for instance no one can actually agree what future realized volatility will be, so right there you can have an opening. Another one is structural, for instance certain market participants are directly or indirectly forced to buy puts no matter what so right there you can get another source of edge (skew). And finally (for this list of examples), in index options there is a well documented excess variance risk premium present that could also be exploited.
The excess price in S&P 500 OTM puts is real, but it's also a picking nickles up in front of a steamroller kind of thing that's hard to take advantage of without putting yourself at pretty big risk for a continual small upside. Taking advantage of unknown future realized volatility is taking a directional bet that the market has volatility wrong, again nothing wrong with it as long as you don't think you're arbing something.There are still plenty of edges in options, for instance no one can actually agree what future realized volatility will be, so right there you can have an opening. Another one is structural, for instance certain market participants are directly or indirectly forced to buy puts no matter what so right there you can get another source of edge (skew). And finally (for this list of examples), in index options there is a well documented excess variance risk premium present that could also be exploited.
I agree. There certainly is edge out there, such as selling high IV liquid names like you said, because implied volatility historically overstates actual volatility. But delta can't really be overstated like vol can, because it has no value. It is a measure of how long or short you are.There are still plenty of edges in options, for instance no one can actually agree what future realized volatility will be, so right there you can have an opening. Another one is structural, for instance certain market participants are directly or indirectly forced to buy puts no matter what so right there you can get another source of edge (skew). And finally (for this list of examples), in index options there is a well documented excess variance risk premium present that could also be exploited.