The "Sex with sheep" section is particularly good and deserves a special recommendation.
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Dirty (sic) Dispersion!
- Thread starter atticus
- Start date
Quote from sle:
so more of a "directional" dispersion thing? trying to understand how you pick the names (the usual "secret" in bespoke disp trading)...
Between reporting months under the assumption that the term-structure will flatten, but less risk than the front-month. Generally limited to 15D on the street-vol and I scale in on down days. dgamma is the risk as I am in the teen-strikes on delta. I look for 300-400bp minimum in skew, but contamination isn't going to help much if these go ATM.
Large theta, so I am generally close to neutral on $premium.
I will follow this thread. I would prefer using low beta stocks vs SPX but this will be instructive as well.
That would be nice to see as well since I sell CC mainly on large value stocks - to see how you would normally hedge the basket (SPX puts, VIX calls).
Quote from optionatrix:
That would be nice to see as well since I sell CC mainly on large value stocks - to see how you would normally hedge the basket (SPX puts, VIX calls).
Short puts -> hedge with index deltas or vol -> if assigned, roll into CC or synthetic straddles and roll hedge -> repeat.
I'll get into this when I enter a new series.
Quote from sle:
based on your gut feel - how much of the strategy is true systematic alpha and how much is your own ability to time risk premium? Personally, I don't do "classical" dispersion unless the correlation levels are stupidly rich and I certainly would never do crap like var swap dispersion...
Most of it is discretionary. Time as synthetic vol allows you to be wrong on correlation. As much so as any systematic vol-seller, but with an assumed better hedge.
Quote from Martinghoul:
The "Sex with sheep" section is particularly good and deserves a special recommendation.
My favourite section by far.
This dispersion trading doesn't seem suited for smaller accounts like mine. Anything less than 50K will simply won't have enough cash for hedges, etc, not to mention the insane high margins required to sell index options...