volatility arbitrage

[destriero]

If I look at WMT for example, their beta is .5 but there 1M ATM vol is higher then the SPX. I understand that there is company risk which is why the vol is higher. But it seems to me I would rather be short a basket of low Beta stocks and long the SPX vol. Could you elaborate on why I would do it the opposite? (short SPX, long equity).

hahaha thats insane!! why didnt you just suck oanda dry?!!!!

I posted about it after they killed their mkts by quoting vol at 5x50%. Mkts so wide that the arb was gone. Shortly thereafter they took them off the front-end citing regulatory, which was bunk. Regulatory had recently loosened.

 

[destriero]

have you seen opportunity in todays markets, where the auto-makers index 3 month implied vol is trading near all time highs but F or GM 3 month vol is trading near lows, or Crude Oil Term structure shows High IV in August but the 6 month vol on XLE is quoting normal levels?

XLE is not a suitable exposure against CL.

 

[SillyWilly]

A move to the down side in the index I would rather be long correlation, and long dispersion on the upside. So instead of short the 10D combo on the INDU and long 10D combo on 5 street names as mentioned. What do you think about Long the 10D Index Puts and short street puts and short index calls and long street calls. Am I looking at that correctly?

 

[TraDaToR]

I received a C&D letter stating they would disgorge the gains. IBKR's attorney handled it for me. I never heard from the OCC attorneys again.

Why did IBKR chose to handle it through their lawyers? Were you co-defendants in the same complaint or something like that?

 

[destriero]

Why did IBKR chose to handle it through their lawyers? Were you co-defendants in the same complaint or something like that?

It’s been 16 years, but no, I don’t think that IB was named. It was a C&D after the arb was crushed. I called IB and they sent two dudes from Winston & Strawn to my condo the next day. IBKR cleared the trades. They did some digging though (OCC lawyers) as they were pushing a case for Pro using RAES as I’d traded for Paloma. I recall that I had received notice of an info-subpoena the next day that had been served to IBKR, so their legal dept was already working on it.