How to trade volatility?

[srinir]

You decided to expose yourself and prove your ignorance.

His name is chimp after all.

 

[sle]

You answered yourself! That's why Buffett is Buffett and we are we wasting a beautiful Sunday in a trading forum! That's the difference between a synthetic and outright option.

I might live a life of Prince Charles on credit but owning Royalty is a different experience and to protect it is another. That's another difference.

So far nothing you said has any practical application, it's the usual ET-babble. There is obviously a lot of nuance in synthetic vs cash ownership such as voting rights, the treatment of the corporate actions etc. For most retail traders such as yourself these details are irrelevant and there is no real difference.

To add one more difference, 95% traders lose, only 4% win and about 1% win consistently. It's a game of risk mitigation not how much you made or I made?

Sorry, what exactly are you saying?

PS. sadly, like most conversations on ET this one is devolving into a shouting match

 

[destriero]

So far nothing you said has any practical application, it's the usual ET-babble. There is obviously a lot of nuance in synthetic vs cash ownership such as voting rights, the treatment of the corporate actions etc. For most retail traders such as yourself these details are irrelevant and there is no real difference.


Sorry, what exactly are you saying?

PS. sadly, like most conversations on ET this one is devolving into a shouting match

C'mon, sle. The guy can't derive a synthetic and you're going to introduce share-classes? Wait... what happened to Santa?

 

[newwurldmn]

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.

This argument isn't really true.

From a buying power standpoint,
PM will treat both positions the same as vol and spot shocks affect both the same.
Reg T will essentially be 20% + call premium, which is close to the 25% for the share class. Are you really going to do a complicated trade to add 5% more buying power?

From a balance sheet perspective,
The combo takes less capital but you pay for it in the combo price (the put call parity has an interest component which compensates the counterparty for using balance sheet to hedge your trade).

For more retail traders, buying power is the limiting factor not balance sheet. For a bank trader, balance sheet might be but they tend to fund better than the OCC does anyway.

 

[silver182]

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?

Actually I should have said "Use volatility to your advantage when "Selling or Buying" especially when trading weekly options at or near the money, on high volume stocks.

Knowing the price of any high volume stock easily could open @ X dive two or even three bucks & bounce up higher than open "mid day" then back down to close slightly higher than it's open.... "treading up is what I look for"

High volatility options track the stock minute by minute during the day. Betting on those intraday swings & playing it can make a huge difference. I have had weeks that I rolled forward two or three times, not to cover losses but to ride the wave up! In & out with profit, then in again in & out with profit again adjusting strike price same expiration date all the while.

Gapping is an option traders nightmare & best Dream come true all in one!

Gapping is the reason I usually close a position when I'm => 60% profit. Pre-session / Post-session we can't trade options( As we all know pre & post-session trade volumes are "relatively low", even on the highest volume stocks trading...and to me seem very "Fake" intuitional "action"

Holding weekly options over a weekend doesn't feel good especially if a holding closes out the week => 60% profit.

See one of accounts screenshot example of riding the wave up once & now holding through the weekend.

The 50 contracts Oct-5th 225's you see were rolled into, out of 50 contracts Sep-28th-217.50' put sold @ 1.10 early in on 25th "not the best possible fill during the day" purchased back later that same day @.53.

 

[ChimpTrader]

Knowing the price of any high volume stock easily could open @ X dive two or even three bucks & bounce up higher than open "mid day" then back down to close slightly higher than it's open.... "treading up is what I look for"

High volatility options track the stock minute by minute during the day. Betting on those intraday swings & playing it can make a huge difference. I have had weeks that I rolled forward two or three times, not to cover losses but to ride the wave up! In & out with profit, then in again in & out with profit again adjusting strike price same expiration date all the while.

Gapping is an option traders nightmare & best Dream come true all in one!

How do you discern whether the underlying's volatility is going to burst or subside next?

 

[silver182]

I pay for back testing & charting service....found a good one! That helps with the overall picture....intraday...I watch the cycles myself & jump in or out by feel..yep my feeling..not better than 70% accurate..

https://wallstreet.io

Nice little Gap up this morning early.....)

 

[ChimpTrader]

I watch the cycles myself & jump in or out by feel..yep my feeling..not better than 70% accurate..

Feeling or instinct develops with experience and it cannot be applied universally, rather needs to be concentrated at expertise. That's personal art I would say! Thank you....

 

[destriero]

Instinct develops with experience. √

 

[silver182]

Instinct develops with experience. √

First thing you've posted I agree with....