IVolatility Egar Service

[IV_Trader]

Quote from riskarb:

You realize you'll be short the [slightly] bull delta synthetic straddle with your components? Short the +delta straddle/long index puts.

You may want to consider fronting the cheap-curvature in buying the deep calls. You'd have a replicated iron fly.

you mean that I should buy deep ITM calls instead of stocks ?

 

[IV_Trader]

Quote from IV_Trader:

Current Basket-IV / Index IV ratio=2 , I will go with reverse dispersion for JAN again :
Long DOW stocks
Sell slightly ITM components calls (ratio is 1:2)
Buy DIA ATM puts , where premium received from calls = premium paid for puts.
Worked well for me last month.

just to be clear on the ratio : for every 200 stocks sell 1 cover call

 

[mysticman]

Quote from IV_Trader:
yes , I took 14 days Egar trial (and NOT impressed at all...

So you are telling us that EGAR (part of ivolatilitly) shows MO correlation at 17%, while ivolatility shows it at 3.92%?

 

[riskarb]

Quote from IV_Trader:

just to be clear on the ratio : for every 200 stocks sell 1 cover call

Ahh, I though it was 2:1 options:shares

 

[mysticman]

Quote from IV_Trader:
just to be clear on the ratio : for every 200 stocks sell 1 cover call

Glad you cleared that up because all of us assumed just the opposite.
Despite repeated requests, you still have not yet explained why you insist on buying the stocks with covered calls rather than just selling the puts?
And I'm sure you know that a simple ratio of weighted basket IV to index IV is not really the truth of what is going on.

 

[IV_Trader]

Sorry for confusion with the ratio...
Mistic , I am still in the process (long one) of learning the greeks , especially on the portfolio level (when I grow up , I want to be just like Riskarb , lol), but I'm in total control when its comes to ratios , correls and ABS % changes here. Let me for the first time to disagree with you: Basket IV / Index iv ratio IS real and IS the key figure . Well , atleast IMO it is.
I will try to post the excel file for JAN later , I think its a good way to go this month.

 

[mysticman]

So let's see if we got the details right on this position, looking at the deltas:

Long 100 shares stock (for each component stock)
Short OTM put (equivalent to ITM CC)
100 - (35 or 40) = 60 or 65 deltas for each stock.

Hedge by buying DIA ATM puts for about 1.25 each. -50 deltas each.

Done for even money. Something like that?

If you don't know your deltas, how do you make decisions on what component strikes to sell?
And why buy the stock when you could replicate with an ITM call?

 

[riskarb]

He's essentially long 200 shares and short the one lot risk-reversal.

 

[IV_Trader]

does anyone knows how to cut&paste file into the post ?

 

[mysticman]

Quote from IV_Trader:
does anyone knows how to cut&paste file into the post ?

The same way you do it with any other program. You right click on a program window and click copy, then right click on the post window here and click paste.