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Gamma scalping:what volatility are you trading?
- Thread starter bologeorge
- Start date
Quote from cdcaveman:
so how would you propose to scalp leveraging term structure.. say you think foward vol is priced to high out in the calender.. and you wanna go long the calender... how do you scalp?
i barely understood the box scalp example that was given to me by Ammo.. i mean not really barely but i get it..starting out short a box you start with a credit to work off but your dealing with pulling long option legs off to scalp.. i'm already terrible at picking direction! haha..
so when you pull the long call off a short box. you end up with a short ITM Call option and a long OTM put which is a short synthetic stock position.. but you still have one leg from the long stock position still on which is the short ITM put.. your basically cutting your synthetic long position in half by removing the long leg of it and trapping gamma with it.. of course then whatever happens during the day you can trap, go neutral by putting the long leg back on and sleep great at night..
so now to the term structure.. jelly roll. this is just simply a long short position across the term structure.. long jelly roll is exactly like a long calender .. short stock synthetic front month.. long stock synthetic back month.. this is for arbing things over time.. dividends/ short interest.. or why not trapping gamma.. if your assigned on the short call or your excise your put in the front month at expiration you end up with short stock and long synthetic back month (a reversal) and then that at expiration cancels itself out.. .. soo that being said.. would love to hear how you would gamma scalp on a time spread... you know
basically your gonna leg in and out of the front month short synthetic?
so just for margin purposes pull the short of the front month when underlying is moving up then trap.. or pull the short put in the back month when the underlying is going down and trap..
basically pulling the sheets out from the long stock back month position by pulling one element of it so it can't keep up with the short stock position when the underlying is moving down.. then trap gains.. or vice versa..
another one i've always been curious about... long iron fly against a back month short iron fly... more definable margin requirment on smaller accounts.. your short OTM wing calenders , and your long to 2 ATM calenders..
+IRON FLY front month
+call otm/-call & -put atm/+otm put
-IRON FLY back month
-call otm/+call & +put atm/- otm put
equals
2 short otm calenders
1 otm short call calender +call otm/-call otm (front month/back month)
1 otm short put calender + put otm/- put otm
2 long atm calenders
1 atm long call calender -call atm /+call atm
1 atm long put calender -put atm/+put atm
if you can't short front straddle against back straddle.. this would be the way to do it.. idk.. this is just me brainstorming.. maybe when you have earnings month against pre earnings month.. short straddle on oct long straddle on nov for example in the apple situation... i gotta think about this some more.. thats just two atm calenders one with puts one with calls.. you could do otm long calenders with puts and calls to.. and even ratio more front month shorts and buy wings to cover blow out risk and margin requirements.. a type of time fly.. i'm not trying to figure out a miracle strategy .. i'm just trying to figure out legging around in the term structure.. thanks for your help anyone!
don't trade 8 legs when 2 will do.
What are you really gaining in two butterflies? A long calendar has a capped loss like a butterfly swap.
Quote from ammo:
your'e short the fat strangle and long the cheap wings,you take one of the wings off during a big move or one of the fats, you take both the wings off intrady in chop and let the strangle erode,you have to babysit
what is a fat strangle... are you referring to my iron fly calender with the rest of your comment? isnt an iron fly calender basticlly a subsitute for a long calender straddle.. such that you aren't margined out on the short straddle in the front month
Quote from newwurldmn:
don't trade 8 legs when 2 will do.
What are you really gaining in two butterflies? A long calendar has a capped loss like a butterfly swap.
so simply jog in and out of the short on one long calender...........
what about the synthetic short long stock jelly roll.. thats four legs instead of eight..
you know i'm not trying to simplify this such that i can gamma scalp two legs really... i sort of realize that makes that most sense..actually i didn't realize that fully till you said it.. but it does make the most sense for a small acount.. and actually i'm definitly gonna try that haha..
its got a nice defined risk aspect.. theres no buried margin risk... if your trading otm calenders.. you have liquidity.. you could literally short strangle the front month , long strangle the back month and walk the legs on and off based on action.. does one calender make better sense then two?
i'm actually trying to get a better hold of more complex positions.. i totally realize that commissions and bid and ask spreads make super obstacles the more legs.... i know everyone likes to bottomline things.. but if i don't completely understand the concepts.. i can't visualize how to exploit moves, term structure, etc..
Quote from cdcaveman:
so simply jog in and out of the short on one long calender...........
what about the synthetic short long stock jelly roll.. thats four legs instead of eight..
you know i'm not trying to simplify this such that i can gamma scalp two legs really... i sort of realize that makes that most sense..actually i didn't realize that fully till you said it.. but it does make the most sense for a small acount.. and actually i'm definitly gonna try that haha..
its got a nice defined risk aspect.. theres no buried margin risk... if your trading otm calenders.. you have liquidity.. you could literally short strangle the front month , long strangle the back month and walk the legs on and off based on action.. does one calender make better sense then two?
i'm actually trying to get a better hold of more complex positions.. i totally realize that commissions and bid and ask spreads make super obstacles the more legs.... i know everyone likes to bottomline things.. but if i don't completely understand the concepts.. i can't visualize how to exploit moves, term structure, etc..
Start with 2 legs only. Straddles or strangles. Forget calendars because scalping is not linear there
Keep it simple
Quote from IV_Trader:
Start with 2 legs only. Straddles or strangles. Forget calendars because scalping is not linear there
Keep it simple
so straight buy premium.. leg in and out of the winning or losing side based on direction? is one leg better to leg out on?. for any reason? leg out of winning leg on big surge up when that call gets over priced.. then buy back in when the underlying stops and that call flattens back out.
i like the idea of being long vol in a strangle... cause sometimes you just get lucky and theres a blow out.. or announcement
Quote from cdcaveman:
so straight buy premium.. leg in and out of the winning or losing side based on direction? is one leg better to leg out on?. for any reason? leg out of winning leg on big surge up when that call gets over priced.. then buy back in when the underlying stops and that call flattens back out.
i like the idea of being long vol in a strangle... cause sometimes you just get lucky and theres a blow out.. or announcement
It depends. If I am still in accumulating mode, I will short stock when underlying goes up and buy more options if it goes down. Vise versa for existing position. I am trading strictly events, so taking some âadvantageâ on skew
Quote from IV_Trader:
It depends. If I am still in accumulating mode, I will short stock when underlying goes up and buy more options if it goes down. Vise versa for existing position. I am trading strictly events, so taking some âadvantageâ on skew
I buy a straddle. and then if accumulating mode, add options to delta hedge. when in unwinding sell options to delta hedge. when i can't sell anymore i move to a new strike or cut the position.
works real well when stock is bouncing around. not as well when it gets trendy.
Quote from cdcaveman:
so straight buy premium.. leg in and out of the winning or losing side based on direction? is one leg better to leg out on?. for any reason? leg out of winning leg on big surge up when that call gets over priced.. then buy back in when the underlying stops and that call flattens back out.
i like the idea of being long vol in a strangle... cause sometimes you just get lucky and theres a blow out.. or announcement
I hate being long vol.