Selling ATM Options - Viable for long term strategy?
- Thread starter badlucktrades
- Start date
What, you mean all that bullshit?
It's known as STEC (Stupid Thought Ejaculation Compulsiveness)
* not to be confused with the other STEC, Shiga-toxin-producing Escherichia coli.
Spoiler:
you mean the 104 straddle.
the 103C/105P guts strangle is equivalent to the 103P/105C strangle. the difference between the guts and the standard OTM strangles is the premium between the strikes. So the 3C/5P guts strangle at say $3.00 is equal to a $1.00 outside strangle (3P/5C); the difference is the strike-width, that's it. the equivalency is governed by box arbitrage.
ok, so you want to trade the 103/104/105 iron fly into earnings? It's a dollar wide fly in shares that will probably move 10-20% on the report. Your pricing is inverted (it's 10-15 cents to buy (short gamma), 85-90 to sell (long gamma))
I am on my phone, but I would guess that the long 3/4/5 fly is worth maybe 0.10 offer.
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What, you mean all that bullshit?
It's known as STEC (Stupid Thought Ejaculation Compulsiveness)
* not to be confused with the other STEC, Shiga-toxin-producing Escherichia coli.
Spoiler:
I am usually against frivolous posts such as movie scene clips. But, this has value. It is rather strange that you can't edit the words [SP0ILER] and [/SP0ILER]. If the names have a matching reference, I should be able to rename it "Fortune Cookie" or "additional information" or "references", "citations" etc etc. and still have the drop down functionality.
Baron should be able to remove the "Spoiler" text.
It is very easy for you to backtest this ATM idea if you have the option data. In my experiment with index options I do not see a big advantage of it vs buy-and-hold. You may have slightly higher sharpe but the transaction cost and slippage could make it worse not to mention taxes and the time you spend on trading the options.
If I'm understanding your trade correctly, I'm pretty sure this is the equivalent of a fly as destriero is saying. I back-tested it using data on Netflix going back to 2002, and a call fly with a profit range of 103/105 (2% or so) is only profitable 5% of the time (second table in the image below). Interestingly, the Volatility tool shows that straddle vol is so high ahead of earnings that selling them would have historically been profitable 76% of the time at today's pricing (first table). I used the 10/23 expiry for all of this analysis. Back-testing was done at www.getvolatility.com
Destriero's styles is very easy to recognize, I suggest you search for any threads authored by Atticus and you will understand. Be prepared to spend hours reading over them
Hours?
I spent years trying to decipher atticus' posts. When I understood his language, it was some of the best option and trading education ever - way advanced. Stuff you can't find in books.Some of his throwaway lines were also brilliant. He was generous and cool to many of us, but argumentative and had zero tolerance for bullshit.
I had no idea, until much later, about the circumstances under which convexx left the site.
Hours?
No doubt he is very knowledgeable about options, I would say #1 on ET for options.
IMO .... That is his one big ET weakness which always leads to his downfall. He then comes back with a new ET handle and then "rinse and repeat".
Yes ..... very shocking. I was following the Infamous thread when he got the boot. Rinse and repeat.