How to trade volatility?

silver182 said:
"A synthetic long stock position is where you emulate the potential outcomes of actually owning stock using options. To create one, you would buy at the money calls based on the relevant stock and then write at the money puts based on the same stock.

The price that you pay for the calls would be recouped by the money you receive for writing puts, meaning that if the stock failed to move in price you would neither lose nor gain: the same as owning stock. If the stock increased in price, then you would profit from your calls, but if it decreased in price, then you would lose from the puts you wrote. The potential profits and the potential losses are essentially the same as with actually owning the stock."

The biggest benefit here is the leverage involved; the initial capital requirements for creating the synthetic position are less than for buying the corresponding stock.

"Synthetic positions" are over advertised to be sure...definitely better for the brokerage houses more commish...
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Nobody is advocating for trading the synthetic... unless microstructure dictates. It’s critical to understanding the product.

Here’s an example for you. Suppose the bid on the XYZ 400/500/700 asym put fly is 60x70 because of the deep 700P. The market is wide because the inter-exchange COB is automated and the 700P is $8 wide.

You can replicate the deep 500/700 long put spread via an equivalent 500/700 short call spread which is say, $3 wide.

The improved microstructure on the synthetic results in a savings of $500 due to microstructure.
 
I urge you to kindly converge back to the OP's query How to trade volatility? and to the purpose of this thread. Please refrain from writing stray stuff in order to prove how knowledgeable you all are. Thank you!

silver182 said:
"A synthetic long stock position is where you emulate the potential outcomes of actually owning stock using options. To create one, you would buy at the money calls based on the relevant stock and then write at the money puts based on the same stock.

The price that you pay for the calls would be recouped by the money you receive for writing puts, meaning that if the stock failed to move in price you would neither lose nor gain: the same as owning stock. If the stock increased in price, then you would profit from your calls, but if it decreased in price, then you would lose from the puts you wrote. The potential profits and the potential losses are essentially the same as with actually owning the stock."

The biggest benefit here is the leverage involved; the initial capital requirements for creating the synthetic position are less than for buying the corresponding stock.

"Synthetic positions" are over advertised to be sure...definitely better for the brokerage houses more commish...
More...
Simple and precise! I entered this thread after reading your below post and wanted to ask you a question but was hijacked by some BS.
silver182 said:
This is what I do...again, & again & again...I make money very consistently selling naked Puts...watch & trade only what's trending up when the trend is up. We are in one hell of a bull market but like markets do up's & down's are included!

Example you might try: tomorrow...sell APPL 217.50 puts.. expiration date 28th..."near" the money but below trading price! Use volatility to your advantage when selling. Option prices with APPL & SPY move quickly up & down in-tra-day.. and don't have wide spreads..don't use a Market order!..limit orders work to your advantage trading options...you would be surprised how often you can get a fill to your advantage...by placing an waiting a few minutes. I do this by selling a few units throughout the week. I would suggest you never sell any more units than you can cover..with cash!!..that way what you are trading takes a turn south getting close to Friday and you want to let the shares be Put to you. Next week should be better. You can also use this method trading SPY...it has 3 expiration days each week..be careful..start small & see how it works for you. I have found it's a cash cow...Especially the more margin value your account has.
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<<Use volatility to your advantage when selling>>
My question is not from the perspective of contemplating VIX or its derivatives, but to gauge IV% w.r.t. its Percentile or Rank or compare it to the underlying's Hist. Vol.%. Is that the best that a retailer can do in order to perceive volatility?
 
ChimpTrader said:
I urge you to kindly converge back to the OP's query How to trade volatility? and to the purpose of this thread. Please refrain from writing stray stuff in order to prove how knowledgeable you all are. Thank you!
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Then maybe you should STFU? You derailed the the thread with this embarrassment: https://www.elitetrader.com/et/threads/how-to-trade-volatility.325291/page-6#post-4736812

ChimpTrader said:
"He he he....:D Hang on a minute there mate!

How come long 100 shares and long one put = long call?
My understanding is as below and if you prove me wrong, then that shall be a new learning for me. Thanks anyways....

1 option (be it call or put) = 100 shares. right?

Assuming that lets examine the L.H.S. of the equation:
As,
Long 100 shares = Long 1 Call, right?
Long 1 put = Short 100 Shares, right?"
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Cool story, Bro, but wrong. Horribly, horribly wrong.
 
ssp729 said:
Hello everyone. I am a newbie trader, and i would like to know how i can trade options if i can forecast the volatility index (VIX).

Is it better to trade straight VIX Call or Put options?

Thank you.
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VIX cash is at 12.12%.

November VIX cash (fwd/synthetic) is priced at 15.20%.

ATM Nov SPX vola is at 9.5% (no quotes at the moment).

Nov will converge to cash, but obv it will not approach current ATM vol bc of the strip (wing-vol/valuation). So what do you trade? Selectively on the upside using bull VIX positions or attempt to capture the limited convergence (300) to VIX cash? Assuming that VIX remains low and ATM vols sit under 10?

Trade long vol; long VIX. Don't attempt to short vol via VIX here.
 
ChimpTrader said:
I urge you to kindly converge back to the OP's query How to trade volatility? and to the purpose of this thread. Please refrain from writing stray stuff in order to prove how knowledgeable you all are. Thank you!


Simple and precise! I entered this thread after reading your below post and wanted to ask you a question but was hijacked by some BS.

<<Use volatility to your advantage when selling>>
My question is not from the perspective of contemplating VIX or its derivatives, but to gauge IV% w.r.t. its Percentile or Rank or compare it to the underlying's Hist. Vol.%. Is that the best that a retailer can do in order to perceive volatility?
More...
I'll reply later...sun out here going the field to fly.
 
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