Option experts: try to figure out a fund's strategy

[joneog]

Quote from atticus:

Volatility arbitrage? Strange use of terms for someone selling straddles or strangles.

sell vol, buy xanax

 

[josephsmith88]

it appears fly is very close its risk/reward ratio.

 

[sonoma]

Quote from joneog:

sell vol, buy xanax

And some 5 delta puts. Hedge with the underlying.

 

[eudaemon]

Quote from josephsmith88:

This fund's return is about 12% per year, including 2008, even though they lost 6% in Oct 2008.

They lost 6% in October OR they lost everything they had made in 2008 plus 6% by the end of October?.

 

[josephsmith88]

Quote from eudaemon:

They lost 6% in October OR they lost everything they had made in 2008 plus 6% by the end of October?.

they lost 6% in Oct 2008, but despite that month's loss, they still make 12% in 2008.

 

[eudaemon]

Quote from josephsmith88:

they lost 6% in Oct 2008, but despite that month's loss, they still make 12% in 2008.

In that case, I'm going to guess that they used some option call ratio spread or hybrid thereof. Open risk on the upside and capped risk on the downside.