You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Hedging w/Backspreads vs. Protective Puts
- Thread starter jones247
- Start date
Quote from spindr0:
Gamma scalp the stock against an option position. Then all you have to get right is that small detail called IV (g)
Are you suggesting a straddle, and gamma scalp by going long/short on the stock as the market whipsaws? If so, then I'm in trouble the moment the market takes off on a big trend...
Walt
I guess I could initiate the gamma scalp with a synthetic straddle; however, I'm still dependent upon reversion-to-mean by the market... of course, improved IV would help as well. But on the flip side, Theta and a reduction in IV would seriously hurt - especially if the market is starting to trend...
Walt
Walt
If you're long a straddle, natural or synthetic and the underlying takes off, how is that bad?Quote from jones247:
I guess I could initiate the gamma scalp with a synthetic straddle; however, I'm still dependent upon reversion-to-mean by the market... of course, improved IV would help as well. But on the flip side, Theta and a reduction in IV would seriously hurt - especially if the market is starting to trend...
You're in trouble if you're long options and IV falls or if you're short options and IV rises or if you're long puts or short the underlying and the underlying rises or if you're long calls or the underlying and the underlying drops or or or... You could be wrong no matter what strategy you select. OMG, OMG, OMG! My account value is f-a-a-a-a-l-l-l-l-l-l-l-l-i-i-i-n-n-n-g-g !!!
Instead of gamma scalping, I would probably trade around a given underlying position. For example, if I owned 100 shares of google, when the price goes up I sell a few shares, when the price goes below my base price I buy a few shares... this way I avoid the potential pitfall of IV & Theta... Of course, I would need to protect my underlying position with a collar...
Walt
Walt
With the aforementioned positions you fear IV change and you fear time decay and you fear a trending market but you don't fear partially naked options???Quote from jones247:
Instead of gamma scalping, I would probably trade around a given underlying position. For example, if I owned 100 shares of google, when the price goes up I sell a few shares, when the price goes below my base price I buy a few shares... this way I avoid the potential pitfall of IV & Theta... Of course, I would need to protect my underlying position with a collar...
Round and round we go...