Option expiration term and IV change risk

taowave said:
And look at Mr Muppets Likes to Posts ratio...
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There are G.O.A.Ts (greatest of….) on ET. I did not even notice that. That’s some delicious likes to post ratio right there. I am impressed :D.

Insightful post. I think a lot of confusion in options for me but with time I know I would get better.
MrMuppet said:
This entire option thing is much simpler than you think wich makes it much more difficult at the same time. Read Pierino Ursones book on option pricing.
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des writes in Hieroglyphs??

Never noticed that :)


MrMuppet said:
dude pls, don't...

People are idiots for the most part and like whatever feeds their confirmation bias and this has nothing to do with knowledge^^

Just look at @destriero, probably the geekiest option guy on ET everyone has to bow down to, yet one of the most loathed posters at the same time because of his habbit of shitting all over stupid questions and writing in hieroglyphs.

Nah, post to like ratio is not what defines knowledge

Nevertheless...I give you a couple to prop up yours :D
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MrMuppet said:
dude pls, don't...

People are idiots for the most part and like whatever feeds their confirmation bias and this has nothing to do with knowledge^^

Just look at @destriero, probably the geekiest option guy on ET everyone has to bow down to, yet one of the most loathed posters at the same time because of his habbit of shitting all over stupid questions and writing in hieroglyphs.

Nah, post to like ratio is not what defines knowledge

Nevertheless...I give you a couple to prop up yours :D
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Just to set the records straight, I and I can say for the majority of the people who can't stand @destriero on ET, we don't loathe him because he's a geek option guy or even how he shits all over people's posts. No, we loathe him because he's a fake. He tries to hide the fact that he knows nothing by inventing all those fancy terms and shit that doesn't even exist and he deliberately makes very simple terms and strategies complicated just to give an illusion of his sophistication in the knowledge of options.

I can stand geeks and I have met quite a few here and I welcome their knowledge and insight but what I cannot stand is fake shit.
 
MrMuppet said:
IV surface gives you a hint what to look for. What's the flavour of the month? Everyone buying puts into FOMC? Well, their IV is probably too high to still buy them. As the famous option MM saying goes: "always buy the second highest IV"
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Yes but what I find is whether IV is too high to still buy them is also relative to how much higher the realized volatility or RV ends up being. During the first few days of the pandemic in March of 2020, the average IV of SPX options was three digits and yet the price movements, the realized volatility or RV were even bigger. On this one day in March, the price movement was large enough to trigger the circuit breaker!!

This is why trading options is so hard. You end up getting fucked no matter what you do. It doesn't matter how cheap or expensive you think the IV is, it's what RV determines whether IV was cheap or expensive. If the IV of an option was 100 and the RV ends up being 200, then that IV was cheap but if the IV of an option was 30 and the RV ends up being just 20 then that IV was expensive. You won't know how the RV is until the volatility is realized and by that time, the loss is already done and you are already fucked. If we can know whether an IV is expensive or cheap beforehand then we will all be rich. LOL
 
You have to know which way the stock/index will move or which way vol will move which sort of ties in with direction anyway. If you can do that then you will know if vol is rich or cheap.
 
TheDawn said:
Yes but what I find is whether IV is too high to still buy them is also relative to how much higher the realized volatility or RV ends up being. During the first few days of the pandemic in March of 2020, the average IV of SPX options was three digits and yet the price movements, the realized volatility or RV were even bigger. On this one day in March, the price movement was large enough to trigger the circuit breaker!!

This is why trading options is so hard. You end up getting fucked no matter what you do. It doesn't matter how cheap or expensive you think the IV is, it's what RV determines whether IV was cheap or expensive. If the IV of an option was 100 and the RV ends up being 200, then that IV was cheap but if the IV of an option was 30 and the RV ends up being just 20 then that IV was expensive. You won't know how the RV is until the volatility is realized and by that time, the loss is already done and you are already fucked. If we can know whether an IV is expensive or cheap beforehand then we will all be rich. LOL
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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…..
 
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 :)






MrAgi1 said:
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…..
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