the in the moneys on the box are fat, the fat priced options,loaded with premo,the nov 600c /660p strangle is 94 bid,600p660c 33 bid, add in the change and its a $60 box, you dont have to use aapl but that's 34 worth of premium in the fat strangle thats going to disappear,if we stay between 600 and 660,you obviously won't get it all ,but you see the writing on the wall,doesn't have to be aapl,i dont think you can do it with a customer acct due to margin and commissions,i was just answering another person's question
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Gamma scalping:what volatility are you trading?
- Thread starter bologeorge
- Start date
Quote from ammo:
the in the moneys on the box are fat, the fat priced options,loaded with premo,the nov 600c /660p strangle is 94 bid,600p660c 33 bid, add in the change and its a $60 box, you dont have to use aapl but that's 34 worth of premium in the fat strangle thats going to disappear,if we stay between 600 and 660,you obviously won't get it all ,but you see the writing on the wall,doesn't have to be aapl,i dont think you can do it with a customer acct due to margin and commissions,i was just answering another person's question
ahh the shorts are plump full of premuim.. i'm getting this slang.. i'm better at talking slang about girls or to them.. haha.. so you could just sell that box and make a portion of the 60 bucks as long as the underlying stays in range.. something tells me that 60 dollar range won't hold it..
Quote from cdcaveman:
couldn't find the curve for the ratio that volatility changes say from weekly to intraday..or from 4 hours to 1 tick.. and find a sweet spot to gamma scalp.. your saying that theres a hidden edge because implied volatility levels are calculated on the daily close and intra day realized is much higher then implied.. such that you could gamma scalp at a higher frequency then daily adjustments and arbitrage the difference in daily implied calculations to the actual intraday realized... i personally think that the true players are scalping options against options in this respect or any others... maybe across the term structure..
Thank you cdcaveman.That is exactly what I mean. My idea of gamma scalping is that you long a straddle and use limit orders to scalp the underlying, by doing so you can "sit on" bid- ask spread, which will also bring you some edge.
It seems that the key of this strategy is to find a mean-reverting market, which the short term volatility is higher.
However, I still don't understand why you say a true trader would scalp options rather than underlying. It seems to me that by scalping options will greeks of the portofolio much more complicated.
Quote from bologeorge:
Thank you cdcaveman.That is exactly what I mean. My idea of gamma scalping is that you long a straddle and use limit orders to scalp the underlying, by doing so you can "sit on" bid- ask spread, which will also bring you some edge.
It seems that the key of this strategy is to find a mean-reverting market, which the short term volatility is higher.
However, I still don't understand why you say a true trader would scalp options rather than underlying. It seems to me that by scalping options will greeks of the portofolio much more complicated.
i don't know what i'm talking about "true trader" take what i say as my speculation... i'm throwing shit one the wall hoping someone corrects me haha.. but i do image a options market maker hedging with other options .. not the underlying as much.. besides you have an edge in the spread with options.. i would use options.. for more illiquid options your stuck with the underlying.. please correct me haha..
Let me tell you about my research
if you get realized vola in day period smaller than in intraday constantly - its a simple arbitrage oportunity.
I made lots of backtests - how to rehedge -step was 0.05%, 0.1%, 0.2%...1%... the result on the longrun is the same (with frequent rehedge you pay more comission, so at one point it becomes not reasonable)
So if you think that daily vola is lower - you can simply sell straddle and rehedge it once a day and buy the same straddle and rehedge it once a minute (or whatever). +straddle and -straddle will erase each other and you will get simple stock (future) strategy.
I doubt that it's possible to make money as simply, so i think you are wrong with 30% estimation intraday.
pls comment )
if you get realized vola in day period smaller than in intraday constantly - its a simple arbitrage oportunity.
I made lots of backtests - how to rehedge -step was 0.05%, 0.1%, 0.2%...1%... the result on the longrun is the same (with frequent rehedge you pay more comission, so at one point it becomes not reasonable)
So if you think that daily vola is lower - you can simply sell straddle and rehedge it once a day and buy the same straddle and rehedge it once a minute (or whatever). +straddle and -straddle will erase each other and you will get simple stock (future) strategy.
I doubt that it's possible to make money as simply, so i think you are wrong with 30% estimation intraday.
pls comment )
Quote from morant:
Let me tell you about my research
if you get realized vola in day period smaller than in intraday constantly - its a simple arbitrage oportunity.
I made lots of backtests - how to rehedge -step was 0.05%, 0.1%, 0.2%...1%... the result on the longrun is the same (with frequent rehedge you pay more comission, so at one point it becomes not reasonable)
So if you think that daily vola is lower - you can simply sell straddle and rehedge it once a day and buy the same straddle and rehedge it once a minute (or whatever). +straddle and -straddle will erase each other and you will get simple stock (future) strategy.
I doubt that it's possible to make money as simply, so i think you are wrong with 30% estimation intraday.
pls comment )
30% intraday vol is just an assumption.
I think you don't have to buy a straddle and sell it at the same time.
Simply buy a straddle and hedge it every minute will be the same.
I wonder where did you do the back test. I want to do that but cannot find a proper software. I will appreciate if you can tell me.
Quote from bologeorge:
30% intraday vol is just an assumption.
I think you don't have to buy a straddle and sell it at the same time.
Simply buy a straddle and hedge it every minute will be the same.
I wonder where did you do the back test. I want to do that but cannot find a proper software. I will appreciate if you can tell me.
Multicharts or Omega.
The idea is that if you think that some hedge is better than other (say 1 min is better than 1 hour) you can not buy options, but hedge +gamma every 1 minute and -gamma every 1 hour, and you will get a profit.
Market is rather balanced, so such strategy will not be profitable (in my opinion).
I get the same % vola no matter what time period I use. I think your math is off. Such an arbitrage would be too good to be true now in 2012.
As for gamma scalping, it's the same as with all volatility trading. Long gamma means a slow bleed with occasional big profits, short gamma means slow profits with occasionally big losses. Personally I prefer the latter as I believe there is a systematic overestimation of implied volas in markets due to irrational fear/greed responses (psychology). Personal experiences seem to confirm this, I've been employing such a strategy for a long time now and so far have made decent profits. I also have other filters obviously, I don't just blindly sell vola.
As for gamma scalping, it's the same as with all volatility trading. Long gamma means a slow bleed with occasional big profits, short gamma means slow profits with occasionally big losses. Personally I prefer the latter as I believe there is a systematic overestimation of implied volas in markets due to irrational fear/greed responses (psychology). Personal experiences seem to confirm this, I've been employing such a strategy for a long time now and so far have made decent profits. I also have other filters obviously, I don't just blindly sell vola.