Option expiration term and IV change risk

[TheDawn]

If there is so much risk everywhere,than there is also the flip side,so much return everywhere..

Question is how to capture it, and I do agree with you and Dawn that trading Vol is no walk in the park..And I have been at this longer than I care to remember.

My "arb" that accounts for 85%+ of my P and L(with ZERO down days) has literally vanished. Gun to my head,I will be morphing into more of a directional trader,than pure Vol..My bias is towards short Vol,and I am no longer willing to trade a size big enough to make it meaningful..

Ill keep you posted

With the CPI hopefully getting lower and Fed easing on QT, hopefully the market will be going up and volatility decreasing, short vol will become the more strategy again.

 

[TheDawn]

Well written. So much risk everywhere. You try to trade non directionally and there is still risk that RV be more than IV. And you try to trade directional and then it’s also not…..

Trade directional is the worst. You get double-fucked when you got the direction AND the volatility wrong.

 

[taowave]

Honestly,no clue.....No rhyme or reason to it

 

[destriero]

This thread needs... infinite gamma.

 

[Overnight]

This thread needs... infinite gamma.

View attachment 299574

So you've got a fever? And the only prescription is...?

 

[newwurldmn]

This thread needs... infinite gamma.

View attachment 299574

Asploding gamma.

 

[TheDawn]

Honestly,no clue.....No rhyme or reason to it

I think it's the increase in trade volume in options that just shrunk the bid/ask spread. That's my suspicion.

 

[SavedByTheBell]

These guys just pretend to be top traders. No one is making any money consistently. That’s why all this anger and bitterness.This guy who keeps bringing the “infinite gamma” must have a serious mental disorder. Pathetic! That’s what the markets do to you, if you are not humble.

 

[newwurldmn]

These guys just pretend to be top traders. No one is making any money consistently. That’s why all this anger and bitterness.This guy who keeps bringing the “infinite gamma” must have a serious mental disorder. Pathetic! That’s what the markets do to you, if you are not humble.

37 posts and not one of any content.
Weren’t you banned before?

 

[MrAgi1]

At the end of the day. It appears it does not really matter. Just scaling

I understand how IV varies across expiration and all that(volatility term structure). Also longer term expirations have larger vega than shorter term.

It appears despite having smaller Vega, short term options are exposed to greater risk due to change in implied volatility. Is that true and why? Is Vega useless and just large for no apparent reason in longer dated options?


If there is a sudden unplanned news(unlike earnings) such as a pandemic, natural disaster, political election, major coup e.t.c which option expiration would experience more IV spike(increase in IV); longer or shorter term? And why?

For less serious situations like earnings, market gaps and other none obvious(not extreme) reason for increased market volatility; which expiration term experience significantly more change in IV? And why?


So my short LEAP straddles is better of in times of great uncertainty than short straddle expiring at the end of the week(that I just put on)? Sounds counterintuitive.