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what are some interesting/counterintuitive things you have learned trading options?
- Thread starter thepolarbear
- Start date
Quote from sle:
Yes, which is not capital efficient at all. For example, to short $1000 worth of vega in 1 month ATM option you would need approximately 850k of notional. If you use reg-T margin, your capital requirement is like 250k day one (approximately - i think it all boils down to about 30% of notional as day one margin). And that's to have an equivalent of a single VIX futures. Which is why I was hoping variance futures take off - there is no real access for retailer traders to the realized volatility market. Maybe someone should make an ETF that delta-hedges front straddles or something along these lines instead.
i consider myself to be someone that has the capacity to understand things. . just at a rather slow rate relatively... and yet i have not yet completely rapped my heaad around the details of variance futures... not that i'm a indicator of the general population but its a rather frustrating thing for me that i haven't quite gotton it yet...
delta hedging a straddle to extract the exact variance it is implying is seemingly impossible.. its like the hedge frequency makes such a big difference... if i had a reversal indicator with a high level of statistical significance for the underlying i'm trading.. and i considered that in my delta hedging.. i might be able to extract consistantly more gamma then some fixed rate of hedging... respecitively if i'm in a mean reverting non trending market and i'm short a straddle.. it might not pay to stick to a fixed hedging freqency.. meaning it pays more to slow play the hedging of the short straddle based upon the respect of a mean reversion indicator and or support and resistance areas..
i think in some talk about vega notionals, and variance units i get lost... i get this idea its like the the implied vol at issuance.. called the strike, is the starting value of variance... the futures trade upon the speculation of what is left to be realized given the time remaning till expiration and as well how much variance has been realized up to that point. idk.. this concept is defintily the more counterintuitive thing for me.. because i do understand the concept of delta hedging straddles.. but not variance futuress..
I read through QUANTS. then I realized I can beat the street with the simplest weapon: buy OTMs. when I read through those guys how they price options using brownian movement randon walk. I know those guys did not get the market.
I know nothing about premimum, delta, beta, greek.....what I know is market is not mathematically modelable or scientifically predicatable (generate a theory).
that is why Issac newton lost 20000punds and call a quit: he could not caculate out the madness of the crowd.
the most important thing I learned from the market is:
forget about generaliztion( try to make conculsions, try to build a system using the theory you developed). accept what is. think and act in common sense, not sophisticated 'twisted reality".
when I bought $0.01puts or calls, then suddenly it become 1bucks or even 2 bucks, even 20bucks. I know those guys who use math modelling to price options are those close-circut brain idiots (they have the most sophisticated math mind, but they out of touch with the reality).
I know nothing about premimum, delta, beta, greek.....what I know is market is not mathematically modelable or scientifically predicatable (generate a theory).
that is why Issac newton lost 20000punds and call a quit: he could not caculate out the madness of the crowd.
the most important thing I learned from the market is:
forget about generaliztion( try to make conculsions, try to build a system using the theory you developed). accept what is. think and act in common sense, not sophisticated 'twisted reality".
when I bought $0.01puts or calls, then suddenly it become 1bucks or even 2 bucks, even 20bucks. I know those guys who use math modelling to price options are those close-circut brain idiots (they have the most sophisticated math mind, but they out of touch with the reality).
can you predict earthquake?
no, you can observe other animal's behavior, some animals often know earthquake before human being, such as mice,snake, maybe they know better than us about the earth.
in trading, I am a small retail trader, I closely monitor those monsters, those deep in the market, they know more than me, and know things before me. that is why I call myself a trend follower.
I look through clues of those 'insider''s action/thought, then I bet.
no, you can observe other animal's behavior, some animals often know earthquake before human being, such as mice,snake, maybe they know better than us about the earth.
in trading, I am a small retail trader, I closely monitor those monsters, those deep in the market, they know more than me, and know things before me. that is why I call myself a trend follower.
I look through clues of those 'insider''s action/thought, then I bet.
Quote from sle:
Sorry if I've offended you - I was merely surprised since I can't remember that kind of lack of liquidity in 07, especially in index.
That was directed at Optionbull and not you. Sorry if you thought otherwise.
There are traders here that thrive on providing unsolicited and critiques of the methods of others. I have no issue with that, but it's the way that it's done. Advice and suggestion are completely appropriate and we get that from the guys here that know their craft.
The CTAs and CPOs out there - of which I know many - bust their a$$es to get where they are. They put their P&L and livelihood on the line continuously for all to see, copy and critique. There are a very very limited number of guys just sitting around cashing 2/20 checks and inherently creating no value. They don't get funds and they don't last long. I take offense to the suggestion that "oh, you must be one of those guys".
Quote from sle:
Yes, which is not capital efficient at all. For example, to short $1000 worth of vega in 1 month ATM option you would need approximately 850k of notional. If you use reg-T margin, your capital requirement is like 250k day one (approximately - i think it all boils down to about 30% of notional as day one margin). And that's to have an equivalent of a single VIX futures. Which is why I was hoping variance futures take off - there is no real access for retailer traders to the realized volatility market. Maybe someone should make an ETF that delta-hedges front straddles or something along these lines instead.
I disagree.
Using an IB paper account, we can see that hedging a single VIX futures with SPY options (series of calendar spreads) requires a reg-T margin of only USD90k (EUR66k). The strategy is not perfect and shows downside risks.
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Quote from ktm:
That was directed at Optionbull and not you. Sorry if you thought otherwise.
There are traders here that thrive on providing unsolicited and critiques of the methods of others. I have no issue with that, but it's the way that it's done. Advice and suggestion are completely appropriate and we get that from the guys here that know their craft.
The CTAs and CPOs out there - of which I know many - bust their a$$es to get where they are. They put their P&L and livelihood on the line continuously for all to see, copy and critique. There are a very very limited number of guys just sitting around cashing 2/20 checks and inherently creating no value. They don't get funds and they don't last long. I take offense to the suggestion that "oh, you must be one of those guys".
I did not mean to insult you or anyone. sorry Its this board. Its the same thing over and over, follow a thread and there is no means to end, thread drifts off into some sort of argument and a mental case like hershey get his f'ing face in here....... basically very very hard to learn anything here the only thing of respect in this business is returns. some even do illegal things to get them, im simply wanting to learn to manage money and take some risks
Quote from optionbull:
I did not mean to insult you or anyone. sorry Its this board. Its the same thing over and over, follow a thread and there is no means to end, thread drifts off into some sort of argument and a mental case like hershey get his f'ing face in here....... basically very very hard to learn anything here the only thing of respect in this business is returns. some even do illegal things to get them, im simply wanting to learn to manage money and take some risks
must be kidding!
after searching, the following is the only one that was posted by hershey on Options forum. anybody on ET who expects to learn options from hershey should simply go to somewhere else.
http://www.elitetrader.com/vb/searc...=4239849&sortby=lastpost&sortorder=descending
"
Thread: why is the VIX dropping?
Post: You will find that the market data feeds in raw da
"
Quote from OddTrader:
must be kidding!
after searching, the following is the only one that was posted by hershey on Options forum. anybody on ET who expects to learn options from hershey should simply go to somewhere else.
http://www.elitetrader.com/vb/searc...=4239849&sortby=lastpost&sortorder=descending
"
Thread: why is the VIX dropping?
Post: You will find that the market data feeds in raw da
"
the beginning.... of the none sense. problem with boards is people want to be "heard' rather than give or share information...
No problem.
We're all on the same side here and we're all trying to be better at what we do.
We may oppose each other in trading and take opposite sides and let the chips fall where they may.
I see the options gang as a bit more cerebral and sophisticated as many other trading niches and I think we should have a higher level of civility and respect towards each other.
Just my thoughts...
We're all on the same side here and we're all trying to be better at what we do.
We may oppose each other in trading and take opposite sides and let the chips fall where they may.
I see the options gang as a bit more cerebral and sophisticated as many other trading niches and I think we should have a higher level of civility and respect towards each other.
Just my thoughts...