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help? for people researching options training
- Thread starter IVtrader
- Start date
Quote from atticus:
Nobody on this site loses. Ask Howard Cohodas and his magical unicorn IC strategy that earned in 2008.
haha yes ofcourse, all winners on board here. i've seen some of those howard cohodas posts and to be honest i felt bad for the guy, i think he was well intentioned but surely anybody following any trade advice from him got smoked and no, not in a good way.
oh i've got to mention for the confident iron condor traders/credit spread traders among us, the adjustments can be even more painful for you. i've read the post about rolling out to further out months as a possible adjustment but even though volatility is a little less severe in further out months, when the train is coming its probably best to just get out of its way or better yet, start the trades out in the safest manner possible, in other words, come up with something better and safer.
"Adjustments" in convexity involves either going long gamma; or short gamma through a rolling process. Both involve a *mental* loss-transfer to the adjustment. It's delusional because, 1) they'll do anything to avoid taking the quick loss, and 2) they're averaging into vol on the roll vertically and often in time.
So you are wrong on direction and vol so you add insult to injury by extending duration and by extension, vol-risk? If you're at a hard-limit on vegas then what happens to your risk-limit when you extend from Jan to Mar? I'll get no answer that's in my native tongue, so consider it rhetorical.
Let's say you hedge in delta1 and simply short underlying. You immediately get stuck on direction and begin losing on deltas. You reduce hedge and are whipsawed again. Each trade at an edge loss (albeit minor). The point is that these adjustments are -edge, not +. You're not a f*cking MMer, remember? On the buy-side you're paying the vig like everyone else. Goldman and Citadel can afford to make nickel markets because they're marking to a global dispersion book and you're some dude who took a course.
I would give you ZERO shit if you simply came out and stated you had an edge on direction or vol, but we all know you have neither (we know because by inference as the hedges would not be material). So what exactly is the point of hedging at -expectancy? You're aware these condors have a shit R/R, right?
Sheridan makes a good living with mentoring because all vol is zero at expiration. Trading expectancy for a horrific R/R is Manna from Heaven for you seminar-types because it's in your nature to ignore the "downstream" risks.
So you are wrong on direction and vol so you add insult to injury by extending duration and by extension, vol-risk? If you're at a hard-limit on vegas then what happens to your risk-limit when you extend from Jan to Mar? I'll get no answer that's in my native tongue, so consider it rhetorical.
Let's say you hedge in delta1 and simply short underlying. You immediately get stuck on direction and begin losing on deltas. You reduce hedge and are whipsawed again. Each trade at an edge loss (albeit minor). The point is that these adjustments are -edge, not +. You're not a f*cking MMer, remember? On the buy-side you're paying the vig like everyone else. Goldman and Citadel can afford to make nickel markets because they're marking to a global dispersion book and you're some dude who took a course.
I would give you ZERO shit if you simply came out and stated you had an edge on direction or vol, but we all know you have neither (we know because by inference as the hedges would not be material). So what exactly is the point of hedging at -expectancy? You're aware these condors have a shit R/R, right?
Sheridan makes a good living with mentoring because all vol is zero at expiration. Trading expectancy for a horrific R/R is Manna from Heaven for you seminar-types because it's in your nature to ignore the "downstream" risks.
Quote from atticus:
"Adjustments" in convexity involves either going long gamma; or short gamma through a rolling process. Both involve a transfer of edge loss to the adjustment. It's delusional because, 1) they'll do anything to avoid taking the quick loss, and 2) they're averaging into vol on the roll vertically and often in time.
So you are wrong on direction and vol so you add insult to injury by extending duration and by extension, vol-risk? If you're at a hard-limit on vegas then what happens to your risk-limit when you extend from Jan to Mar? I'll get no answer that's in my native tongue, so consider it rhetorical.
Let's say you hedge in delta1 and simply short underlying. You immediately get stuck on direction and begin losing on deltas. You reduce hedge and are whipsawed again. Each trade at an edge loss (albeit minor). The point is that these adjustments are -edge, not +.
good post, atticus.
i think a lot of credit spread traders are too focused in on the wrong greek 'theta' and how much money they are making on a daily basis, well, this is also part of the fantasy of money falling from the sky.
Quote from daveyc:
good post, atticus.
i think a lot of credit spread traders are too focused in on the wrong greek 'theta' and how much money they are making on a daily basis, well, this is also part of the fantasy of money falling from the sky.
Guys like this need to ask why the street prices vol so poorly. It must be a form of philanthropy. The R/R of these IC's is directly relational to the prob of strike touch (2x) and expiring ITM. The maths are easy and I can approximate vol and price of an IC simply through strike deltas and time to exp.
The trading of risk for expectancy. Unfortunately it's not an edge. I trade condors all the time. I prefer flies, but I have nothing negative to say about the structure in general. I simply prefer not to trade a R/R >1 in most cases.
I disagree. Theta is THE key Greek in identifying what risks you have in the book. In fact, the best way to identifying if you are long risk or short risk (assuming a large delta-neutral book) is to look at your headline theta.Quote from daveyc:
focused in on the wrong greek 'theta'
I think the wrong thing a lot of these people do is to indiscriminately sell risk premium. I'll quote from my old boss' email (may he rest in peace):
Selling risk premium is like having a bunch of one night stands. There is nothing bad about it if you use proper protection, even if it reduces the sensation. Otherwise, sooner or later you'll catch something nasty that could ruin you for the rest of your life. Remember this whenever you seek the pleasure of collecting carry.
Quote from sle:
I disagree. Theta is THE key Greek in identifying what risks you have in the book. In fact, the best way to identifying if you are long risk or short risk (assuming a large delta-neutral book) is to look at your headline theta.
I think the wrong thing a lot of these people do is to indiscriminately sell risk premium. I'll quote from my old boss' email (may he rest in peace):
hahaha, Izzy?
I think Dave means that these guys are manifestly concerned with maximizing theta per dollar in haircut, and therefore trading at limit.
Quote from atticus:
The trading of risk for expectancy. Unfortunately it's not an edge. I trade condors all the time. I prefer flies, but I have nothing negative to say about the structure in general. I simply prefer not to trade a R/R >1 in most cases. [/B]
A ....
- Any clues as to the secret sauce behind selecting wingspreads with R/R >1
- You are not holding to expiry are you?
Cheers
JP
Anyone know if Fattail gone underground?