SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Referring to your earlier post; buying the bottom of the smile entails buying otm calls. Yes, you're long smile when buying itm calls due to the demand for the otm puts[synthetic call demand], but the increase in $vol is bled as the gamma decreases and intrinsic value increases. It's helpful, but I wouldn't go deep itm simply for vol-edge on a rally. You'd getter a better vol-move in buying the atm or otm vol for gaining vol edge from curvature. You're buying declining gamma in either the itm or atm case.
Buy the 30delta otm options if a huge move is expected. The gains from smile will be substantial if the calls go itm; obviously the gains from dgamma and delta will outpace smile edge.
Go long the atm if you're looking for the best r/r under a fairly high frequency assumption. FWIW, gaining edge from vol smile is difficult. In a rally, the strip vols will usually lose much more than can be gained from smile.
And do you look at that link to JA to control or quicken your breathing...
C'mon you knew that comment was just around the corner....
C'mon you knew that comment was just around the corner....
How many times per minute? I really don't know and I assume it's highly variable. You focus on breathing, but not on pace, per se.
Here's the first machine I purchased:
http://www.mindmachines.com/Relaxat...GearPR2xLightandSoundMachinewith10Colors.html
Do a google on "mind gear sound light" or "sound light machines"
Chrdso,
Little late in replying here but:
What you might be missing, that Phil alludes to, is that IN GENERAL when SPX rises, the IV goes down (across the board) meaning that the entire IV skew becomes transposed lower more or less.
When you look at the volatility graph on ToS, that is not representing what volatilities will be like when SPX is at various levels! So your inference that volatility increases as SPX moves higher for options from 1320 to 1375 is a misinterpretation of the graph and what it means.
The graph is simply a snapshot of where IV at various option series are at RIGHT NOW.
It's also important not to get too clouded when looking at vol graphs close to expiration. The closer you get to expiration, the more of a smile you get largely because options OTM retain a residual minimal value e.g. 0.05. Due to the minimum pricing increments this means that options way OTM have a premium/IV higher than they theoretically might otherwise have.
Not sure if all of that helps or hinders.
Momoney.
Little late in replying here but:
What you might be missing, that Phil alludes to, is that IN GENERAL when SPX rises, the IV goes down (across the board) meaning that the entire IV skew becomes transposed lower more or less.
When you look at the volatility graph on ToS, that is not representing what volatilities will be like when SPX is at various levels! So your inference that volatility increases as SPX moves higher for options from 1320 to 1375 is a misinterpretation of the graph and what it means.
The graph is simply a snapshot of where IV at various option series are at RIGHT NOW.
It's also important not to get too clouded when looking at vol graphs close to expiration. The closer you get to expiration, the more of a smile you get largely because options OTM retain a residual minimal value e.g. 0.05. Due to the minimum pricing increments this means that options way OTM have a premium/IV higher than they theoretically might otherwise have.
Not sure if all of that helps or hinders.
Momoney.
Thanks Riskarb.
So, to gain volatility edge in a expected move, the .30 delta options work best.
ATM options work better if the move is not as much, or not quick enough.
What are strip vols?
Thanks. I thought the option prices move along the same graph as the index moves. Did not realize that it is a "snapshot of where IV at various option series are at RIGHT NOW"
This is a good rule of thumb, though I'm personally a little more conservative than that - I rarely have confidence in huge moves in any direction.
This is key...it's very difficult to play the smile/skew by itself for profit.
Agreed, unless you are very lucky to have IV explode in tandem with the rally. Not the norm by any stretch!
Momoney.
Riskarb,
Did the google and saw the link -- very interesting. Does it work for you? How is it compared to, say, 1/2 hour on the treadmill?
An older friend of mine bought a device called Resperate -- it's medically proven to lower blood pressure. It's all sound, no light.
Coach, sorry for the OT intrusion....
Did the google and saw the link -- very interesting. Does it work for you? How is it compared to, say, 1/2 hour on the treadmill?
An older friend of mine bought a device called Resperate -- it's medically proven to lower blood pressure. It's all sound, no light.
Coach, sorry for the OT intrusion....