Not to overstate the obvious, but if you sell half of your GENR, we assume you must still have the other half 
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Volatility trading
- Thread starter drukes1234
- Start date
Ya ya optioncoach lol
Bought some HUG here
Might buy some WRES too -- if I do it'll be very light
What "negative tone"? You mis-named your thread, so people who got misled tell you so.
Quote from drukes1234:
It's amazing how almost all threads replying to a post where someone has success has a negative tone.
I'll continue posting here under volatility trading because my trades are usually in excess of 50% gain.
Regards
The implied volatility smile is the result of the market pricing in the probability of black swan events.
Quote from Don Bright:
Yes, and this is the point I was trying to make in my earlier post. This paper is pretty good...except that disagree a bit with the Implied volatility negating the Black Scholes modeling. We have always used historical/local volatility in valuations, while the actual trading prices of options skew to the implied (obviously).
The simple way to look at this is "Where they're trading" (Implied)vs. "Where we think they should be trading." (Our estimated volatility).
Anyway, I certainly don't want to discourage posting, especially when there is some value added.
Don
No, the +skewed strike put and call must trade at equal vols. This is inviolate. There is no method by which to arbitrage the vol smile. You can buy cheaper vols through replication, but that's not an arbitrage, it's a pairs-trade with large correlation risks.
You would hold a reversal arbitrage at incredible edge if it were possible to somehow trade mean volty and sell +skewed otm put volty[itm call volty]. There is no greater potential in an otm reversals than an atm reversal. The same can be stated concerning conversions if trading deep itm +skewed calls.
You would hold a reversal arbitrage at incredible edge if it were possible to somehow trade mean volty and sell +skewed otm put volty[itm call volty]. There is no greater potential in an otm reversals than an atm reversal. The same can be stated concerning conversions if trading deep itm +skewed calls.
I wasn't thinking the same strike, but more like short/long straddles or something at different vols. I guess the reason would be that the smile may flatten or steepen, no way to know which?
I'm sure there's no way to do this, a little too obvious. Just trying to understand why it's a no-go.
Thanks,
- The New Guy
EDIT: Spread, not arb
I'm sure there's no way to do this, a little too obvious. Just trying to understand why it's a no-go.
Thanks,
- The New Guy
EDIT: Spread, not arb
Quote from riskarb:
No, the +skewed strike put and call must trade at equal vols. This is inviolate. There is no method by which to arbitrage the vol smile. You can buy cheaper vols through replication, but that's not an arbitrage, it's a pairs-trade with large correlation risks.
You would hold a reversal arbitrage at incredible edge if it were possible to somehow trade mean volty and sell +skewed otm put volty. There s no greater potential in otm reversals than atm.
Quote from thenewguy:
I wasn't thinking the same strike, but more like short/long straddles or something at different vols. I guess the reason would be that the smile may flatten or steepen, no way to know which?
I'm sure there's no way to do this, a little too obvious. Just trying to understand why it's a no-go.
Thanks,
- The New Guy
EDIT: Spread, not arb
That would form the basis of a VIX swap or replication. Going long or short the strip vols. Useful for trading basket volatility strategies, but not something of great allure unless you're interested in hedging vol exposure and want a cheaper to deliver solution than buying otm skews.