I did very well but I can’t share unfortunately. There are a lot of little opportunities around at the moment.
The hunt for crisis alpha
- Thread starter globalarbtrader
- Start date
To be clear I wasn't thinking about the arb which is definitely institutional only, more like a market making strategy. Spreads on some ETFs have been very wide. This is driven by NAV uncertainty, but it isn't technically the discount you are buying since you don't arb against the underlying. For example I have an EM bonds ETF which had a bid-ask that was 80-90 for a long period of time.
GAT
"Little" as in not worth it for a fund? If so, any crumbs you want to throw out for the retail dregs to fight over? PM is also fine haha
You have to find them yourself, otherwise it's cheating!
I'll share two that have worked for me thus far. Maybe it will get @Same Lazy Element to be more generous
When the ES hits the circuit breaker overnight, place an order to sell the same day expiration (if there are any) puts 20% below the previous close. Trading stops for the day after the 20% level. Your only risk is marked to market losses so don't go crazy.
The first time I did this I got filled at $5 on the ES and they quickly went to near 0 within an hour. I had orders in on SPY, SPX, and ES before the open.
That being said the most recent halt there was no bid for the puts.
Another trade that has been looking good is long the Vix futures (front months) and long ES. The roll-up has been huge the past weeks. A quick and dirty way to see this is plotting the VXX returns vs SPY over the past month.
What we see is if we ratio the trade correctly SPY Beta being 2.7 vs VXX we would do very well. There have even been a few days where VXX was up and SPY was up. I think at one point the VIX front month was 25 points below Spot with only a few days to expiration.
I'll share two that have worked for me thus far. Maybe it will get @Same Lazy Element to be more generous
When the ES hits the circuit breaker overnight, place an order to sell the same day expiration (if there are any) puts 20% below the previous close. Trading stops for the day after the 20% level. Your only risk is marked to market losses so don't go crazy.
The first time I did this I got filled at $5 on the ES and they quickly went to near 0 within an hour. I had orders in on SPY, SPX, and ES before the open.
That being said the most recent halt there was no bid for the puts.
Another trade that has been looking good is long the Vix futures (front months) and long ES. The roll-up has been huge the past weeks. A quick and dirty way to see this is plotting the VXX returns vs SPY over the past month.
View attachment 222573
View attachment 222574
What we see is if we ratio the trade correctly SPY Beta being 2.7 vs VXX we would do very well. There have even been a few days where VXX was up and SPY was up. I think at one point the VIX front month was 25 points below Spot with only a few days to expiration.
Option holder will choose to exercise if it hits the 20% limit unless it's cash settled. I know I would.
You sell the put below the 20% circuit breaker. Why would you exercise? It would have 0 intrinsic value.
Because you estimate the fair value of the underlying to be way below the 20%. Just because the price is limited by circuit breaker doesn't mean that the fair value isn't moving.
That's not very smart. You would lose all your extrinsic value if you exercised your option.
However, maybe I was not clear. You sell the same day expiration option. After a 20% drop the stock stops trading for the day.
If there are no bid for SPY puts, can't you sell where ever it is available like MSFT, AMZN or AAPL puts. Since the markets will be closed for the day, those puts should also expire worthless right?