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Riskarb's combo to fly conversion journal
- Thread starter riskarb
- Start date
Quote from riskarb:
I sold the June Gold 630/640 strangle synthetically for 33.00 at 23% vol. I'll hedge lightly on a break of 623/653 and hope to offset or condor the position at 20% vol next week.
Offset the strangle for $33.00. Vols have dropped 200bp, but the delta was beginning to become a concern.
PF Dissection:
A 1x3 PF is simply a synthetic 1x3 ratio-write [spot x option]. The natural PF is an advantage in index markets w/o an futures contract, such as the SOX. To replicate the ratio write [PF] in such an index would require a two-way synthetic in the options:
SOX put-skew ratio write: Short atm call/Long atm put x Short 3 otm puts
SOX put-skew PF: Short itm call/Short 2 otm puts [same-strike]
Reduces the 3-way synthetic trade to a 2-way. Obviously in futures options it's preferable to trade the 1x3 ratio write with futures/options. Applicable in equity options with put skew in issues with restricted shorts, or for anyone preferring to trade options-only.
PF synthetic = futures x 3 otm puts[calls]
1x3 ratio synthetic = PF
Skewed Index PF: Short itm call [short futures/short put synth] x short 2 otm puts [same-strike]
A 1x3 PF is simply a synthetic 1x3 ratio-write [spot x option]. The natural PF is an advantage in index markets w/o an futures contract, such as the SOX. To replicate the ratio write [PF] in such an index would require a two-way synthetic in the options:
SOX put-skew ratio write: Short atm call/Long atm put x Short 3 otm puts
SOX put-skew PF: Short itm call/Short 2 otm puts [same-strike]
Reduces the 3-way synthetic trade to a 2-way. Obviously in futures options it's preferable to trade the 1x3 ratio write with futures/options. Applicable in equity options with put skew in issues with restricted shorts, or for anyone preferring to trade options-only.
PF synthetic = futures x 3 otm puts[calls]
1x3 ratio synthetic = PF
Skewed Index PF: Short itm call [short futures/short put synth] x short 2 otm puts [same-strike]
Quote from IV_Trader:
IV_trader,
I did not find any good stocks for combo to Fly and RC trades this earning season.
Here is the news.
Some retail results were not so positive. Chico's FAS (down $7.10 to $30.00, Research) slumped 19 percent in active New York Stock Exchange trading after the women's clothing retailer reported weaker-than-expected April sales and issued an earnings forecast that fell short of analysts' estimates.
Earnings are on 5/22. Current ATM IV - 44% - Average IV is 45%.
Since earnings are on 5/22, June options would be better. Hoping that IV would increase as we move into earnings date.
CHS vols are up big , anyone thinking of shorting combo at those levels ?
Quote from frisbeeca:
Riskarb, what do you think about a strangle on GOOGster?
Short 10 Jun450 Calls, Short 10 Jun390 Puts for a credit of 20? B.E. is between 370 and 470...?
A 420 straddle would be preferable if you're looking to carry those long deltas. I wouldn't suggest it unless you're bullish on GOOG to 420 a share.