Hedging ratios for vega neutrality/vomma trading

[ironchef]

If you need it, then you need it. Most people (including professional vol traders don’t.)

If your example took days for you to figure out then formalizing the second order Greeks isn’t your solution. It’s an intuitive understanding of how options work. you learned something in that analysis. Next time you will be thoughtful about this risk factor when you put on a similar trade. And next time you will encounter another risk factor that will take days for you to understand. That’s how the learning works.

I’m learning everyday and I’ve been trading vol for almost 20 years. I bet @sle will say the same thing (and he knows a lot more about vol trading than I).

Great comments.

Especially for those who are math and computer challenged, it is important to live on intuition. That is how I survived trading options for the last 6 years now going 7.

 

[ironchef]

Retail strategies have one thing in common: You need to be right about the direction of the underlying with them and they are the exact oposite of how market makers are managing risk.

Joe Public sells 10-20 delta wings for "income" and buys ATM for "cheap leverage". John Doe trades verticals for delta and buys calendar spreads and butterflies for the decay.

Market makers and smarter people hoard wings so they can sell juicy ATM premium, trade risk reversals or combos for delta, only get into calendars when they want to trade term structure and trade butterflies for skew and delta.


And that's why retailers don't have a lot of edge, they trade options positions as strategies or proxy for the underlying and not the options themselves.

I often complained that as a small retail without fancy math and trading models, I had a great disadvantage. It is generally true but the pros among you pointed out that I was way too pessimistic, that the greatest edge of a retail was I could pick and choose what, when and how I trade.

 

[digitalnomad]

So I've recently started to look into options trading since I'm getting old.

30 is the new old I guess

 

[MrMuppet]

30 is the new old I guess

well, 30 is definitely old for traders....but I'm a little beyond that

 

[destriero]

If you're willing to trade SN vol. $7K haircut under TIMS/PM. Vol stressed (down) to bottom two decile figure.

 

[MrMuppet]

If you're willing to trade SN vol. $7K haircut under TIMS/PM. Vol stressed (down) to bottom two decile figure.

View attachment 304337

skew lock ?

 

[Adam777]

lol ... I just read my 2019 posts in this thread and I now realize how little I really knew. Now that I am trading every day, it is very different to just reading books and quoting someone else's ideas.