Smart Money Sells Straddles!

Chuck Norris is selling payers (puts on bonds) - he does not need protection against high rates.... high rates need protection against Chuck Norris!
 
One of the most liquid OTC derivative markets out there is in the trading of CDS: ChuckNorris Death Swaps.

... It's Friday afternoon, nothing better to do.
 
Quote from heech:

One of the most liquid OTC derivative markets out there is in the trading of CDS: ChuckNorris Death Swaps.
More...
when Chuck trades a CDS, it always ends in a bullet payment!
 
Quote from spindr0:

Is it a coincidence that the tracking period starts in May of '09 when conditions became ideal for selling premium? (see 2nd data list)

A naked straddle strategy would have been smacked in '08 despite the higher IV. In order to have broken even, the average straddle premium received would have needed to be about 9.3 pts. I think not.

SPY monthly gain/loss (option cycle):

01/08 (16.07)
02/08 3.08
03/08 (3.06)
04/08 6.40
05/08 4.18
06/08 (11.08)
07/08 (5.60)
08/08 3.67
09/08 (5.53)
10/08 (30.91)
11/08 (13.69)
12/08 8.67


05/09 1.94
06/09 3.02
07/09 2.09
08/09 8.84
09/09 3.75
10/09 2.17
11/09 0.54
12/09 0.78
01/10 (1.00)
02/10 1.93
03/10 4.83
04/10 3.39
05/10 (10.25)
06/10 2.61
07/10 (5.07)
08/10 0.87
09/10 4.96
10/10 5.21
11/10 2.59
12/10 4.01
More...

I went into TOS thinkBack and ran "weekly" short strangles for 2008 on IWM. I just picked whatever was first OTM (whatever TOS selected as ATM). I opened a position on Friday and closed it on the next Friday, and opened a new one wherever the market happened to be. No adjustment, just take the hit on losers. Sold 100 each week. I think they used opening prices so most of the time it would be the same as closing at EOD Thursdays.

-11450
5850
7200
-6550
-200
7450
3450
4800
-600
22350
6850
2250
-3950
-9050
5500
6400
5100
-6050
4750
150
150
10350
9750
50
-3650
6000
10200
1900
5000
3850
800
5000
4150
1400
2650
-2750
-5850
-37350
-52150
51850
-4750
-6950
15000
-10150
-15900
-17100
5400
15000
10250
7750
======
54150

(Note - I am prone to making errors, especially when copying from one field to another, too bad TOS doesn't allow for exporting trades to a spreadsheet.)

(Note #2 - As I said on another thread, Nick Leeson killed Brings Bank by selling naked straddles or strangles.)
 
Common misconception on Nick Leeson. He himself says the naked straddle position isn't that significant; at most, it was the proverbial straw that broke the banks back.

I recall his straddle trade was something like +$200 mil that fall, and th Kobe earthquake turned that into a -$200 mil loss. It was primarily his long position in the futures that killed him... Accounting for something like $1.1 billion in losses.
 
Quote from heech:

Why the f did I have to mention the Kobe earthquake...
More...

...if you followed astrology you would have known this and other events will be happening, moon is approaching closest to earth in many years, actual date is next sat 20110319....
 
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