[sigh]
Awesome. It's so trivial that anyone can do it, just by reading some newspapers.
Go forth and show us all how it's done.
Modelling skew dependent on vol of vol
- Thread starter MrMuppet
- Start date
[sigh]
Awesome. It's so trivial that anyone can do it, just by reading some newspapers.
Go forth and show us all how it's done.
So she sold her soul to the devil. A servant of God should not devote themselves to false idols, such as money. She is supposed to serve only God, not her own egotistical self-interest. That's the whole point of becoming a nun and devoting one's self to God! To rise above!
I guess I am still no where near being comfortable with this stuff. I have been perplexed by this last sentence "...trade LVLD hedged with spot". If it is already long delta, how is delta 1 going to hedge the position? Or are we supposed to short delta 1? Tried modeling it in TOS. Didn't make sense either. Please enlighten me.
Long vega, long delta (you got that) on index as upside calls are (-)skewed. OTM vols increase as they gain deltas. Hedged with short underlying or skewed structures (ps -> put spreads). You can't model it at static vol. Go long a 20D strike narrow call diagonal and price that (OTM) strike(s) at prevailing ATM vol.
Thanks a lot @destriero. Had to ponder on it a while. But it was well worth it. I guess, LVLD is more like a direction. With delta being hedged, it's mostly a volatility play. Looking down the SPX chain made it all clear. Thanks for the tip on valuation as well. Hats off to you!
It's a skew play. You're less concerned with your vega than the smile dynamics. Short a put at 100, buy a call at 50, and you've got a $50 credit to lose in spot (hedge). The dynamic hedge is done in spot/futures. Obv as you go further OTM you gain vol-edge but increase risk. >edge, <hedge.
It gets more complex when you're spreading (verts) in lieu of using short put/long call, OTM strikes. The "revenue side" flips from puts to calls when complex spreads are involved. I cannot go into detail as I spent a week in LV working with ppl on this topic.
...Potent potables were involved, surely!
I was told that a drank a pitcher of SOTB pre-Hakkasan; six shots of Goose and some (ugh) CR at Hakkasan. Ofc the Crown Royal was straight out of the bottle.
The girl was $1,000 offer but I was $800 bid. No takers. I have no memory of the event.
This is a clear indication that you had a great time. I am quite jealous, because I am darn sure I could drink you under the table. You may know options, but man do I know my liver. Maybe next year. ;-)
while this statement is true. I believe the converse is a necessary truth as well: You can’t trade skew or vol of vol without taking a directional view.
Des explained why above
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