OTM vega neutral upside hedge
- Thread starter hardtofin
- Start date
G
Got it! Thanks so much once again. Fantastic help!
Sorry to be a pain Destriero but i have one more question.
Regarding the timing of the calendar and the 25d risky. Say for example i am going to trade the May/Jun calendar, do you look at both of those riskies and therefore the skew of both May and Jun? Whats is the process there?
What I mean to say is, is the the individual months skew a factor or do you just look at the skew of the month you are going to short, in this case May?
Thanks again
Regarding the timing of the calendar and the 25d risky. Say for example i am going to trade the May/Jun calendar, do you look at both of those riskies and therefore the skew of both May and Jun? Whats is the process there?
What I mean to say is, is the the individual months skew a factor or do you just look at the skew of the month you are going to short, in this case May?
Thanks again
No, I don't. Say that the back-month covers the NFP or GOOG earnings (NDX position), then I'd consider the term-structure, but I'd be out by the time the front expired anyway. If anything, I'd ignore the back-month knowing that it will gain from synthetic time (drift higher in vol due to upcoming macro event) and pay whatever vol is printing.