The Beauty of Options - Portfolio Insurance at a Discount

ironchef said:
I am very confused. Don't know who is right and who is wrong. :banghead:
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No one’s wrong. They’re all right within their own worlds. Dest and Tao seem to take strict mathematical approach with greeks, while Bobby trades way OTM where greeks and BS fall apart. I trade OTM ratio spreads and calendar ratios and back ratios, and I’d also have hard time arguing why my trades work and why they’re safe. I think there may be small edge to Bobby’s approach that can be managed or improved with practice. Just like trading butterflies a thousand times could give you more insight how to trade them properly.
 
Booby trades 1-2 lots of garbage backspreads (yeah, it's a backspread) because it doesn't take any skill to trade garbage strikes. He's wrong bc he doesn't understand the product.

Booby stating that he "has zero theta next week" bc he doesn't understand that the theta at his vol-line is inviolate; he will win (or lose) excess return on delta or vega sensitivity, not bc theta ceases to exist.

I made the (relativistic) joke because he doesn't understand which product is the variable.

He doesn't understand synthetics or microstructure. That 5/1 condor was a cautionary tale. WTF trades 300-400 pts ITM on ES? They stop quoting deeps at 100-200 ITM. Sure, he can calc the conversion with the OTM call... does he strike you as someone who can do that? And why? Just trade the iron.
 
destriero said:
He doesn't understand synthetics or microstructure.
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I'd absolutely suck at trading condors and you'd think I'm totally dumb, but there are some setups that I've studied/tested and traded so many times that I feel comfortable trading those only.
Likewise, I think that no one can beat you with understanding synthetics or microstructure, or even overall the options domain, but if someone focuses on just one strategy and studies it over and over, they may be able to do better than anyone else who didn't spend much time on that.
Personally I don't like his hedges expiring sooner than his naked puts, but I suspect that with him frequently reviewing his risk, he may be able to adjust those and always stay hedged, whether sometimes it may cost some, while other times he may be able to harvest some theta. I have no problem believing that he doubled one of his accounts trading this specific strategy, even though he may suck at trading everything else, like most of us.
At least he did explain his approach with details that anyone totally clueless wouldn't be able to. He might've just been too cocky in asserting his superiority in trading options :-)
 
Dest and I are certainly not wrong..We are basically stating the obvious,though it may appear complex..I broke down Bobbys strategy into simple building blocks..I saw it as a backspread and calendar in its simplest form. It was obviously a ratio diagnol,but that would imply someone knew they had a calendar and short vertical..And yes,it is ratioed..Notice,I never mentioned the Greeks..

If you are going to say way OTM option greeks fall apart,state your case..

Bobby has said this is not portfolio insurance,yet the thread title is Portfolio Insurance..No mention of any portfolo..

I have an issue with trading strategies that are billed as "one size fits all",meaning they hold up under any vol enviorment..

You trade ratios and calendars...Im guessing you like a high IV vol for one,vs low IV for the other..

Last but not least,a great trader can make an average strategy look really good..Bobby may very well be a great trader.



guru said:
No one’s wrong. They’re all right within their own worlds. Dest and Tao seem to take strict mathematical approach with greeks, while Bobby trades way OTM where greeks and BS fall apart. I trade OTM ratio spreads and calendar ratios and back ratios, and I’d also have hard time arguing why my trades work and why they’re safe. I think there may be small edge to Bobby’s approach that can be managed or improved with practice. Just like trading butterflies a thousand times could give you more insight how to trade them properly.
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Bobbys portfolio insurance account doubled in a severe correction. Can anyone tell me how the portfolio did? Or has the strategy morphed into a stand alone

I have no problem with short cal/diag in a high vol environment..makes sense








guru said:
I'd absolutely suck at trading condors and you'd think I'm totally dumb, but there are some setups that I've studied/tested and traded so many times that I feel comfortable trading those only.
Likewise, I think that no one can beat you with understanding synthetics or microstructure, or even overall the options domain, but if someone focuses on just one strategy and studies it over and over, they may be able to do better than anyone else who didn't spend much time on that.
Personally I don't like his hedges expiring sooner than his naked puts, but I suspect that with him frequently reviewing his risk, he may be able to adjust those and always stay hedged, whether sometimes it may cost some, while other times he may be able to harvest some theta. I have no problem believing that he doubled one of his accounts trading this specific strategy, even though he may suck at trading everything else, like most of us.
At least he did explain his approach with details that anyone totally clueless wouldn't be able to. He might've just been too cocky in asserting his superiority in trading options :)
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