What does Karen the Supertrader and her results say about volatility? Oversold?

sellindexvol66 · Mar 17, 2014

sle said:
Really? How is selling convexity on both sides of the distribution is "hedging"?

lol, just mind blowing.

Van Halen · Mar 17, 2014

panzerman said:
I thought she said she did 95% probability on puts and 90% on calls. That would make it a 1.643 SD move to the down side or a 1.282 SD move to the upside.

I did not know that is what she stated. If that is the case, then yes she probably would have been nicked once or twice during that time period.

I was using 2 SD as a benchmark to discuss how she or anyone else would have done using 2 SD as a guidepost which I use on some instruments and know others who do as well.

I will tap-out. I am not that interested in her trading style. I stand by what I said, not one time in the last 14 years has the SPX finished outside 2SD, at least how and when I calculate next months levels.

Best of luck

Pekelo · Mar 17, 2014

sle said:
Really? How is selling convexity on both sides of the distribution is "hedging"?

The way that in a sudden move one side will still make (or keep) the money... It might not be a conventional hedging but the point is that she is playing both sides....

drownpruf · Mar 17, 2014

Pekelo said:
The way that in a sudden move one side will still make (or keep) the money... It might not be a conventional hedging but the point is that she is playing both sides....

lol right. Sells the strangle for $6 and the puts go to $13. At least she made a bit on the calls! There were guys in the '87 crash who lost on OTM call vola when the market crashed.

jamesbp · Mar 17, 2014

Van Halen said:
I stand by what I said, not one time in the last 14 years has the SPX finished outside 2SD, at least how and when I calculate next months levels.

Best of luck

How do you calculate 'next month levels'?

jamesbp · Mar 17, 2014

Pekelo said:
The way that in a sudden move one side will still make (or keep) the money... It might not be a conventional hedging but the point is that she is playing both sides....

A bit like 'Portfolio' hedging ... or 'Texas' Hedging ....

oldnemesis · Mar 17, 2014

Texas Hedge:
â n
the opposite of a normal hedging operation, in which risk is increased by buying more than one financial instrument of the same kind

Kind of insulting to Texans isn't it ??

I guess it's OK since they wouldn't get it anyway.

sle · Mar 17, 2014

Pekelo said:
The way that in a sudden move one side will still make (or keep) the money... It might not be a conventional hedging but the point is that she is playing both sides....

Let's take a different example... If you are selling hurricane insurance, does selling drought insurance make you "hedged"?

sle · Mar 17, 2014

oldnemesis said:
Kind of insulting to Texans isn't it ??

IMSMR, it references Texan cattle ranchers who go long cattle futures while already owning cattle. Oddly enough, it makese perfect sense from a producer point of view.

Pekelo · Mar 17, 2014

sle said:
Let's take a different example... If you are selling hurricane insurance, does selling drought insurance make you "hedged"?

Well, can both happen at the same time? And nobody said anything about full hedge, but yes, as long as one position makes something on the other side we can considered it somehow hedged.

"A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses/gains suffered by an individual or an organization."

Even if one side blows, the other side still offsets somethin'....