Hi there,
I trade alpha on correlated stocks. Some of my analysis seem to suggest that the spread, mean reverts faster than one would expect of a random walk.
If this is the case then selling the vol appears to be a reasonable stratergy using options.
So if i am long share A short share B --Then to sell vol i'd write a staddle option
sell call A sell put A (at them money in all cases)
buy call B sell put B
Does this seem like a good stratergy or am I better off just sticking to the long short futures?
( I am hoping to eliminate some of the risk of the spread increasing in return for less upside)
tanks
Tom
I trade alpha on correlated stocks. Some of my analysis seem to suggest that the spread, mean reverts faster than one would expect of a random walk.
If this is the case then selling the vol appears to be a reasonable stratergy using options.
So if i am long share A short share B --Then to sell vol i'd write a staddle option
sell call A sell put A (at them money in all cases)
buy call B sell put B
Does this seem like a good stratergy or am I better off just sticking to the long short futures?
( I am hoping to eliminate some of the risk of the spread increasing in return for less upside)
tanks
Tom