Range Trading with Options - Vanilla & Exotics

C

CPTrader

Here is a thread for people to discuss various methods of range trading using options - vanilla and exotic strategies.

Pros/cons of various strategies, market risks, execution risks, preferred strategies, limited risk/unlimited risk issues, etc.


The floor is open to the option pros.
 
Wow, no responses from all you gurus...??!!

Also I am curious as to your general view on limited-risk short gamma trades – hidden risks of the strategy, pro, cons, examples of such trades apart form condors & butterflys, etc

Also is it possible to construct a range barrier trade/ double do not touch trade that is flat or long gamma using exchanged traded options or exotics. Or can this NOT be done? Will such a trade ALWAYS be short gamma at trade initiation?

Many thanks!
 
No touches[touches] cannot invert gamma modality, either paired or singles. You can mitigate the gamma risk with long-dated positions, but the gamma goes vertical near the strike, regardless of time to expiration. They cannot be replicated with vanilla options. With luck, the SEC will see fit to stop babysitting the US investor and allow for retail-trading of exotics.

You might want to consider trading digitals if you can find a retail shop. SocGen's clickoption doesn't carry credit risk, but their pricing isn't very competitive and you'll need to be a EUR-citizen to play. BoM is really your only option unless you establish a PB with serious cash.
 
Quote from CPTrader:

Wow, no responses from all you gurus...??!!

Also I am curious as to your general view on limited-risk short gamma trades – hidden risks of the strategy, pro, cons, examples of such trades apart form condors & butterflys, etc

Also is it possible to construct a range barrier trade/ double do not touch trade that is flat or long gamma using exchanged traded options or exotics. Or can this NOT be done? Will such a trade ALWAYS be short gamma at trade initiation?

Many thanks!
More...

I'm here , bro...
 
Quote from riskarb:

No touches[touches] cannot invert gamma modality, either paired or singles. You can mitigate the gamma risk with long-dated positions, but the gamma goes vertical near the strike, regardless of time to expiration. They cannot be replicated with vanilla options. With luck, the SEC will see fit to stop babysitting the US investor and allow for retail-trading of exotics.

You might want to consider trading digitals if you can find a retail shop. SocGen's clickoption doesn't carry credit risk, but their pricing isn't very competitive and you'll need to be a EUR-citizen to play. BoM is really your only option unless you establish a PB with serious cash.
More...

Thanks risk. Now while a short iron condor or double diagonal is not a direct replication of the exotic DNT barrier option aren't the risk/rewards "fairly" similar. Any disadvantages/advantages of the condor/double diagonal vs the exotic DNT?
 
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