Newb Q on Selling strangles into earnings to profit from IV dump

Quote from IV_Trader:

I'm tracking vols and stock's movement around report time for five years now. If anyone would see the results they would of be shocked to find out that vols/ABS % change ratio is the same from qtr to qtr. And all this happened while VIX went from mid 30th to low current levels. But here is why this game is not easy anymore : back in 01 vols on CREE use to collapse from 100 to 70 overnight , but now its collapsing from 42 to 30 (notice , same 30% like before). But in the old times vega gained 300bp vs only 120bp in current days. So if I was right/lucky and stock did not moved , my dollar and cents gains been cut by 2/3 (!!!). Same goes for vols expansion into report.
Your ISRG (high nominal vols) example is just another reminder of the "good times" , will they ever come back ?
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i guess (being a newb to option trading) i just gravitated to the stocks that look like the 'good old days" without knowing it. actually, it's not like i started thinking about this because i had insight- more a case of having a 5,6,7% move in the stock and still getting killed by the IV dump a few times.

i guess the aforementioned MSFT example shows the 'bad new days' when the IV has a horrible r/r profile. obviously MSFT has a much higher correlation to the VIX than an ISRG...
 
Quote from gangof4:

let me know if i am understanding you correctly:

are you essentially saying that you support my short strangle (or straddle) premise if it is protected from catastrophe by a well OTM long strangle (ie: ~15 delta)? (sorry- being such a newb, i don't know which winged insect/animal this is called off the top of my head!).

thanks.
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Nein, das ist nicht, was ich sage.
 
What would the MM haircut treatment be on a fly dispersion/vol arb strategy: short index straddle + long component stock strangles.

Do you get relief on the short straddle haircut from the component strangles?

Slightly OT but you mentioned the overnight haircut issue so...

MoMoney.

Quote from Maverick74:

Nein, das ist nicht, was ich sage.
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Quote from momoneythansens:

What would the MM haircut treatment be on a fly dispersion/vol arb strategy: short index straddle + long component stock strangles.

Do you get relief on the short straddle haircut from the component strangles?

Slightly OT but you mentioned the overnight haircut issue so...

MoMoney.
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No, but your haircut is very generous in this example. You put up little next to nothing for all your long strangles and your short index trade gets very attractive haircut treatment especially if it's the Dow or S&P. Nasdaq is a little higher. No way you could do this on retail margins.
 
Thanks, good to know.

Quote from Maverick74:

No, but your haircut is very generous in this example. You put up little next to nothing for all your long strangles and your short index trade gets very attractive haircut treatment especially if it's the Dow or S&P. Nasdaq is a little higher. No way you could do this on retail margins.
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Quote from momoneythansens:

Thanks, good to know.
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be careful , MO . The January dispersion would of be a huge loser when Index ( I do DIA) and almost every component went the same direction. Three out of four legs ( except of short put on the index) were a losers. In the matter of fact , reverse dispersion is the way to go lately ( two months out of three)
 
Quote from IV_Trader:

be careful , MO . The January dispersion would of be a huge loser when Index ( I do DIA) and almost every component went the same direction. Three out of four legs ( except of short put on the index) were a losers. In the matter of fact , reverse dispersion is the way to go lately ( two months out of three)
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wow, hate to admit that i have no idea what you guys are talking about!
 
sorry for what is probably a very basic question (my brain hasn't been used for much mathematics since roughly 1985).

what is the equation for calculating my maximum loss in any long/short strangle scenario? an example:

short 45 puts
short 55 calls

long 35 puts
long 65 calls

obviously this would imply holding to expiration (which i wouldn't do, of course).

with that in mind, any recommendations as to software that does a reasonable job projecting the post earnings IV drop and, based on that, plotting the projected next day position P&L on a graph? or even software that lets me plug in different next day IV's to plot the projected contract prices at the various IV's i input?

if there's a trading/brokerage platform that has this capability (ie tradestation or IB), all the better.

thanks (and sorry again for the lame newb questions).
 
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