You are quoting riskarb from '03. In dest's more recent posts(< 5 years) he absolutely trades directional.
Destriero - Butterfly Trades
- Thread starter ironchef
- Start date
Yeah, a lot has changed in 17 years. I was mostly working legit arbs (COMS multi-listed under RAES) and rate arbitrage in the early 2000s. That, and unwinding of the telecom dereg and internet bubble. I didn't start making stupid money until I traded a bias. I've made more in the last four years than the prior twenty. I've doubled my net liq three times in the last four(years).
Don't trade neutral... even if it means a large reduction in exposure. I am not stating that you can't trade neutral wings, but it's not a trading strategy. And I am referring to systematic vol-sales via ICs and the like. It will always end badly unless you can time it or hedge in D1 or cheap verticals.
I am essentially trading permutations of one position in vol now. It's not flies, but I still trade flies in large size for a three to seven day hold.
Use wins to finance wing buys (deep verts). Trade futures around your position. Stick to liquid contracts. Work on a skew and smile model. Believe what you see and predict where it will be (sticky models).
Don't trade neutral... even if it means a large reduction in exposure. I am not stating that you can't trade neutral wings, but it's not a trading strategy. And I am referring to systematic vol-sales via ICs and the like. It will always end badly unless you can time it or hedge in D1 or cheap verticals.
I am essentially trading permutations of one position in vol now. It's not flies, but I still trade flies in large size for a three to seven day hold.
Use wins to finance wing buys (deep verts). Trade futures around your position. Stick to liquid contracts. Work on a skew and smile model. Believe what you see and predict where it will be (sticky models).
And by "bias" I mean it to express a move in strike vol on contamination/touch, not simply a market bias (but that, too).
You lost me at "use wins to finance wing buys(deep verts)"
How is a wing related to a deep vert?
How is a wing related to a deep vert?
I've been struggling to learn directional trading ever since I saw a post of yours saying something like "you'll never amount to jack in this business unless you learn to trade directionally." Unfortunately, none of my experiments have worked out - they were break-even at best. Any suggestions on a method or approach?
Someones getting close to the secret sauce
Ironically all I had to do was study a bit of the Greek language and a tad of Latin and all of a sudden riskarbconvexxdownprufatticusdesterio‘s post became more clear, like a veil lifted.
i think he meant wing/deepvert is synonymous
Use the wins (realized gains) to finance the wings on deep ITM verticals?
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Do you recommend always initiating a natural fly slightly OTM at order entry? In the direction of your price/vol bias? Instead of ATMF?
