skew locks

[destriero]

Nice job. What is a switch lock?

Something, something, thingy.

This account has about 1.2MM in it as I use it for cash trading and futures ops (SPAN and RegT). I have a PM account held with my wife for TIMS.

I mention it bc I had tail risk of about $4K as I am long vol throughout the curve. I bot puts so my tail risk is above x now. Long 5K index deltas. There is no price on index where I can lose through exp.

 

[spy]

Something, something, thingy.

That must be defined in the glossary of Hull because Natenberg's book is more of an introductory text. I'll double check.

 

[ET180]

I mention it bc I had tail risk of about $4K as I am long vol throughout the curve. I bot puts so my tail risk is above x now. Long 5K index deltas. There is no price on index where I can lose through exp.

Do you normally hold these positions through expiration? Does the whole position expire on one expiration or multiple?

 

[destriero]

Comes off this Friday.

 

[it365]

When did you start this position?

 

[destriero]

When did you start this position?

Jan 26.

 

[Cabin111]

Des, just wondering how you would do in a 9/11 scenario...Markets closed for 6 days.

Then, large swings the following Monday...Thanks.

On Tuesday, September 11, 2001, the opening of the New York Stock Exchange (NYSE) was delayed after the first plane crashed into the World Trade Center's North Tower, and trading for the day was canceled after the second plane crashed into the South Tower. NASDAQ also canceled trading. The New York Stock Exchange Building was then evacuated as well as nearly all banks and financial institutions on Wall Street and in many cities across the country. The London Stock Exchange and other stock exchanges around the world were also closed down and evacuated in fear of follow-up terrorist attacks. The New York Stock Exchange remained closed until the following Monday.

 

[destriero]

I lost 18% after 9/11. Took me six months to recover.

My skew and switch lock positions are risk off but have delta1 leverage upside. It doesn’t have leveraged downside, but it is still long vol but PNL terminates at the bear tail, which usually is a small debit risk or a small credit earned. If mkts crash I earn a bit over the (known) tail value as vols rise. I will show a payoff when I am back at my desk.

A market closure would be beneficial as the trade would exercise/assign accelerating the return. The issue going forward wouldn't be beneficial as vols would dot shot and opportunities would be more scarce, but I would then look for switch lock opportunities.

The edge to vol relates to bimodal skew (sticky delta). I can't go into detail w/o giving it away.

 

[destriero]

Mother in law traded her first SL with my help. Ran the RR figure, normed it to ATM, ran the component trades and placed the COB order before the Fed. $290 haircut under TIMS/Portfolio Margin. Made 5x the haircut in a day.

Mods, please close this thread, thanks.