Long straddles are profitable around 20% of the time as are strangles. On the other hand, short straddles and strangles are profitable 80% of the time. A writing strategy has much more chance of success than a long one. --Even though selling premium will choke off profits on major moves.
Straddles, are they ever profitable?
- Thread starter TradeCat
- Start date
-- gamma scalping is also known as hedging your deltait's coincidental that the structure (straddle) starts out delta-flat(ish), otherwise you'd be trading delta against it at the inception of the trade
-- there is nothing "defensive" about delta-hedging - it's a way to transform your risk from exposure to terminal distribution to exposure to realized volatility
-- all of the major Asian indices have high amount of structured product issuance, so the there are fair number of interesting things to do there (KOSPI and NKY are my bread and butter)
-- as a retail trader (unless you have portfolio margin) your capital efficiency as a delta hedger will be dismal, since you will be posting high margin for the stock
-- how delta hedge really depends on your risk preference - you can re-balance the book based on delta threshold, time threshold or a combination of the two. There are arguments for either
-- another parameter that most people ignore when hedging delta is what vol to use for hedging as it will determine your relationship with the underlying (e.g. in case of straddles if you hoping for mean reversion, you want to hedge at lower IV, while if you are hoping for a trend you want to hedge at higher IV)
Why ?
Lets visit this again ??
http://greyenlightenment.com/post-2008-wealth-creation-guide/
Market took a nice dive SPXU up 7.0% the exmple synthetic short this guy gives has no open interest no movement, both SPXU and TMV,
Thank you for sharing the website. In it he stated that a leverage ETF returns were not a simple multiple of the underlying ETF but were path dependent. I understand the statement but do not understand why. Can you kindly explain the logic behind it?
Thanks.
I don't quite understand the explanations posted there.
3x etfs can offer offer significantly magnified returns if the path is favorable.
But because the stock market tends to spend a lot of time churning (as you can see in 2015), 3x ETFs tend to slowly decay. Stock market gains are often interspersed between months or even years of churning.
But because the stock market tends to spend a lot of time churning (as you can see in 2015), 3x ETFs tend to slowly decay. Stock market gains are often interspersed between months or even years of churning.
Not an options guy, hoping some of you experts can weigh in.
We all know about IV crush following a scheduled event. Earnings, FDA, etc.
But what is the typical IV decay profile post-event? As an example, let's say a company is reporting earnings in afterhours. Assume conference call scheduled for next day at 10am. Assume weekly ATM call/put is pricing in a 10% move one way or the other. Now assume the stock opens flat the next day. At the open, how much would the IV typically drop? Might look for excessive IV crush where we can get long a straddle and profit from large realized in the next day or two. Thoughts?
We all know about IV crush following a scheduled event. Earnings, FDA, etc.
But what is the typical IV decay profile post-event? As an example, let's say a company is reporting earnings in afterhours. Assume conference call scheduled for next day at 10am. Assume weekly ATM call/put is pricing in a 10% move one way or the other. Now assume the stock opens flat the next day. At the open, how much would the IV typically drop? Might look for excessive IV crush where we can get long a straddle and profit from large realized in the next day or two. Thoughts?