The Beauty of Options - Portfolio Insurance at a Discount

This thread is cartoonish. The dude disappears while losing. Adds insult to injury and shorts gamma just as the mkt prints an intraday bear reversal.
 
Sweet Bobby said:
Moderator, please close this thread. There is nothing but criticism here. You can't share anything on this forum without being attacked. Dest is clueless about theta, and you can't make that donkey learn any new tricks.
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Angelo_60 said:
Not that I'm aware of.

I don’t know who is Ron Bertino (should I?) but if someone can point me out to a source explaining “false theta” I’m happy to hear from him.

PS of course, you know the decay of DOTM is very different (almost linear even in the last days before expiration) than at ATM, but it’s still a decay, no free lunches here….




Yes, there a direct relationship.

Just keep in mind the joint jpeg and you’ll be immune from the fables of some serial options sellers who claim to “maximize the theta while minimizing the gamma exposure”.




No, according to the B&S framework, you get the risk free return if you hedge away all risk (gamma, vega, theta risk etc…), measured by the greeks.

It’s just theory, there no reason to cover all the risk… no risk no opportunity!

But if someone knows how to get some freebies on theta, please let me know… I’m all in!






Well, Weeklies are expensive, so people like to sell. But they are expensive for a reason.

Maybe you know LJM, they were some of the oldest professional option sellers on the market. They blow up in just one night, on Feb 2018 (Volmaggeddon), because they were short weeklies, and unable to stand the burden (even with their supposing professional, automated, continuous hedging)

Also, people like to buy FAR because these FAR options have less theta. Problem is …. by now you already know….. if you have less theta, you also don’t have much gamma.

Moreover, FAR options have the biggest VEGA but…. IV for a distant expiration move much less than the first delivery, so this VEGA doesn’t protect you when you are short of weeklies, and the VEGA of the short weeklies blows up in one’s face.

Formally speaking, as Taleb, (once again) explained, VEGA is not additive on different expiration cycles, which means you cannot algebraically sum up VEGA SHORT DATED with VEGA LONG DATED (Taleb also proposes a correction factor, but also his solution is just a roughly approximation).
The big boys (e.g Susquehanna, Wolverine etc..) treat this matter as strictly confidential , and there’s not a set of rules and procedures commonly accepted.



Well, we have benchmarks.

Artemis Vega Fund has an history going back to 2012 (if I remember well) and Chris Cole sailed also the 2008 crisis. Performance data are on Eurekahedge database (but on a subscription basis).

The naïve way to get tail risk protection is to buy X% of VXX for every Y% of equity. This comes at a cost (negative carry of VXX) but is a passive procedure. So you expect an active manager (to which you pay fees) to be much more efficient in providing the same or better level of protection.
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Thank you, I think. o_O It will be a long time before I can understand what you wrote. :(

I am in the minor league. My niche is straight cash secured/covered or buy stand alone calls/puts, counting on directional and convexity to keep me in the black. It worked. The problem is I have very lumpy returns. So I have been searching to find a way to smooth out the occasional big drops like Feb-Apr 2018, Dec 2018, Mar 2020.....

Back to the drawing board.

Best regards,
 
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ironchef said:
Thank you, I think. o_O It will be a long time before I can understand what you wrote. :(

I am in the minor league. My niche is straight cash secured/covered or buy stand alone calls/puts, counting on directional and convexity to keep me in the black. It worked. The problem is I have very lumpy returns. So I have been searching to find a way to smooth out the occasional big drops like Feb-Apr 2018, Dec 2018, Mar 2020.....

Back to the drawing board.

Best regards,
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Stick around, Ironchef! The answer is here.
 
Great day in the markets. I was busy scalping NQ and MNQ. I love the micros because you can scalp against existing deltas a lot easier.

Here's the risk profile of the misunderstood trade by those such as Poopy Dest. He doesn't realize that this is a great complement to my hedge as an income trade. So far, so good!

stuff.JPG
 
Here are two of my income structures, and as you can see I've got them layered over each other which widens the big profit tent. I'm not playing for the lottery hit in those tents, but rather the profit from the upper expiration line if the market continues to grind higher. I place these trades on down days in the market when hopefully the VIX pops a bit.

two.JPG
 
guru said:
So basically unbalanced iron condors.
https://www.google.com/search?q=unbalanced+iron+condors&tbm=isch
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Absolutely correct, Guru. I create these to give me profits if the market moves up. They show significant (though defined) downside risk, but the risk is fully absorbed by my hedges.

I have had 3 of these structures on since April 8, 2020 and I now have only two remaining. I took some profits on the first one. I may close the second one shortly.
 
Sweet Bobby said:
Here are two of my income structures, and as you can see I've got them layered over each other which widens the big profit tent. I'm not playing for the lottery hit in those tents, but rather the profit from the upper expiration line if the market continues to grind higher. I place these trades on down days in the market when hopefully the VIX pops a bit.

View attachment 233409
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lol to the blended position... best case? $3K. Worst case? ($40K). What a joke.
 
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