The secret to buying pre earnings straddles
- Thread starter TheBigShort
- Start date
This was posted last THU and Macy's closed at $40.56.....
Kim,
Even though I often go slightly below, my example ACTUALLY was an ATM straddle....so eveyrthing you posted is actual wrong.
Kim,
Don't make up post trade rules. I suggested this as a trade last THU to show sellig the straddle. I never said the rule was has to be done night before, you said that. The trade example to support BigShort's thesis was posted last Thursday using an ATM straddle.
Don't make up post trade rules. I suggested this as a trade last THU to show sellig the straddle. I never said the rule was has to be done night before, you said that. The trade example to support BigShort's thesis was posted last Thursday using an ATM straddle.
1) The 40 straddle is representative if you want to get short deltas.
2) The 40 straddle did not close at 4.05. It was 4.05 bid at the close. Nobody is going to hit the bid.
3) PM haircut is under $500. Who cares?
4) You were already done. Post a trade.
The shares went off at 41.87 at the close. The 40C traded 3.00. The 40P traded 1.15. The net change was showing 4.36 (1.20P; 4.16C). The synthetic traded 1.15 + 1.15 + 1.87 = 4.17 at the close which is more indicative on microstructure.
So 4.17 to 3.15 on the day. So a 20% gain on PM haircut.
Kim I am pretty easy going and don't like to criticise others, especially when you are genuinely trying to get better. But I hope your subs realize you paper trade. I can almost guarantee you, you started out trading and realized you weren't good, so you repackaged your knowledge and charged a fee.
You said spreads are huge and you won't get a good fill. Spreads are huge after a large move and a vol crush because, 1 leg will be worth 0 (or close to it) the other leg will be deep in the money with a delta close to 1. In the money options usually have wider spreads but, market makers will be happy to sell you that delta 1 for a small dime above fair value for the easy arb.
Your business model will fail because you have stopped learning. I don't know much but something I do know is that you should really take the time to learn the option market so you can actually provide value and will gain clients much quicker. You also provide me and my colleagues with some entertainment so its good to have you around on ET.
pretty flat skew on M, unlike you. Pure vol play?
Peace,
How does a trader start in exotics... with $5,000....... are you talking exotics such as compound, barrier, etc or just complex options like spreads?
Peace,
Amahrix
EDIT: Might've read that wrong, what was is total capital that he started with? Pretty cool.
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He started at binary.com (betonmarkets.com). One of the few legit retail dealers. It's now owned by a property billionaire (Mellon). Talking about 1st gen exotics (touches/barriers).