Quote from atticus:
So you want to buy ATM (synth straddles) and hedge discretely?
OK, I have a close friend who makes markets in CL. He went huge in the ATM straddles (synthetics) and went bust. All it takes is to miss a couple of hedges and get pinned. He could've save a mil simply by getting out a day before expiration, but was high on hopium. Imagine telling your kid he's got to leave Exeter because of one bad trade in CL.
The moral is that you can (effectively) go bust in long gamma as well.
You buy a vol-figure and hit all your hedges... even assuming this you've got to see realized vol exceed your bought figure to account for edge loss/slip on the hedge. It's really not a money maker for the upstairs guy. It's useful to scalp with a one lot to get the mechanics down, but not something I want to generate a lot of PNL.
At you're funding it's essentially a waste of time.
my fucking micro funding you mean haha.. I find alot of people saying so many times "its a matter of being under capitalized" its the same premise as the statistic that most businesses go out of business because of underfunded... thats one way to crack it.. the other way is good businesses get plenty of funding.. its the guy that doesn't get funding that thinks there is scarcity in capital and his problem is under capitalization.. I personally believe that you can make it with a small amount of capital.. (i would have to think that to succeed in my position anyway) haha all more would do is make for a bigger blow up in most cases anyway.. a fool and his money are soon parted as they say... from my readings i hear most guys hedge options with options as much as they possibly can and get far away from the underlying as they can.. for the reasons you stated. hopium is a bitch..