Hi
I work as a professional trader in Stockholm, Sweden and yes, I know this topic already has been discussed before, but I still got a few things I would like to ask you about.
Before I ask anything I can add this:
I can short both of these in size without any large probability of getting called on the stock loan. I can borrow at a 4-5%.
Are not these ETF:s just a path-dependent option with expiry towards infinity and eventually they both will drift towards zero, given that the underlying index won't drift in one direction for infinity. The two components that will drag down the value of both of these are volatility and the holding period for the position.
Am I correct in my statement?
If this is correct, then there are no free lunch, shorting both of these at the same time will just be a sort of straddle strategy with a time decay (theta) and short gamma?
Shorting both will be good in a high volatility market with no drift and bad when the volatility is low and the underlying is drifting. More or less how the situation is currently.
By shorting them and/or using some kind of options, is there any good risk/reward strategy one can use to isolate the rebalancing factor, fees, and other costs dragging the etf:s lower?
Been thinking about call spreads, buying puts or somethng similar..
Has anyone tried something like this?
Please join the discussion and come up with your thoughts about this topic!
I work as a professional trader in Stockholm, Sweden and yes, I know this topic already has been discussed before, but I still got a few things I would like to ask you about.
Before I ask anything I can add this:
I can short both of these in size without any large probability of getting called on the stock loan. I can borrow at a 4-5%.
Are not these ETF:s just a path-dependent option with expiry towards infinity and eventually they both will drift towards zero, given that the underlying index won't drift in one direction for infinity. The two components that will drag down the value of both of these are volatility and the holding period for the position.
Am I correct in my statement?
If this is correct, then there are no free lunch, shorting both of these at the same time will just be a sort of straddle strategy with a time decay (theta) and short gamma?
Shorting both will be good in a high volatility market with no drift and bad when the volatility is low and the underlying is drifting. More or less how the situation is currently.
By shorting them and/or using some kind of options, is there any good risk/reward strategy one can use to isolate the rebalancing factor, fees, and other costs dragging the etf:s lower?
Been thinking about call spreads, buying puts or somethng similar..
Has anyone tried something like this?
Please join the discussion and come up with your thoughts about this topic!