What Option Strategy Do You Use?

[ironchef]

Ive taken some monster hits short near by gamma,and in the words of Carly Simon,"I havent the need for the pain"

A tale of two cities and the two different worlds you and I live.

Hard for a small time retail like me to imagine what you experienced back then.

 

[taowave]

Not sure if you were replying to me,but is this the Jacobson you are referring to?
Dont see the option trader connection.
Is his approach Buffet esque?

The firm, which describes itself as a value-oriented investment manager, has compounded at 10.2 percent since its inception in 1998, compared with 6.7 percent for the MSCI World index and 7.4 percent for the S&P 500.

However, it has delivered middling performance over the past four years. Highfields posted low- to mid-single-digit gains each year from 2014 through 2017. It was down a little more than 1 percent in September and slightly more than that so far in 2018.

Again, you might want to read up on him, before you make assumptions with no basis. There are hundreds of accounts employing his technique worldwide. I'm not going to give you investment advice, so reading could give you a better understanding.

 

[wxytrader]

Yes,but only cash secured,which essentially treats .20 delta a 1.00 eliminating leverage and hence real "bank"

Ya but you need capital to buy 100 contracts or more to be able to make bank on calls... essentially if you take on 5% risk then your 'bank" will be limited to less than a CSP...as I pointed out in the example.

 

[ironchef]

Can you check whether the following depicts the situation correctly?
https://optioncreator.com/st1xfpt
Of course the IVs can be different.
By setting Qty=0 and then 1 you see the change in the PnL chart...

Sorry I can't answer anything too specific.

Basically the concept is if you have a stock or an option that is already ITM, you can collar it (protect the profit) with selling a higher call to pay for buying a put to protect the downside. Of course what you pay is the limited up side, just like a covered call or a spread.

 

[Quanto]

Sorry I can't answer anything too specific.

Basically the concept is if you have a stock or an option that is already ITM, you can collar it (protect the profit) with selling a higher call to pay for buying a put to protect the downside. Of course what you pay is the limited up side, just like a covered call or a spread.

Actually it looks like "arbitrage" b/c there is no loss at all.

 

[ironchef]

Hello ironchef,

its all the same. Make money, who cares about the instrument.

Plenty of money in options, just make money.

I am sorry @SimpleMeLike it is not that simple.

When I day trade, it is like you said, just click and make money.

Option is a slightly different animal. I have a math model I use to calculate the option price, compare it to the price displayed, study MM's greeks, look at the underlying's fundamentals, add my view of the drift vs volatility vs time.... then place a trade or pass.

It is hard work, wish I can "just make money".

 

[ajacobson]

https://www.wsj.com/articles/SB838251655605936000

It's an interesting story if you spend the time to search it out. He was the first button on the phone turrets of almost every desk, but it was a while ago. Many of the OBOs had his picture taped up on their posts.

 

[ajacobson]

While Harvard won't say what stocks Mr. Jacobson bought or sold or how he picked them, Mr. Light describes him as "a very shrewd, disciplined quantitative thinker who does relative-value trades in a very interesting kind of way." A person close to Harvard Management says Mr. Jacobson basically uses options, futures and other derivatives to exploit brief discrepancies in stock prices. Harvard disclosed in its annual report that such a strategy -- it didn't say Mr. Jacobson was the only manager using it -- earned the school a 38.3% return last year.

 

[ajacobson]

The most interesting part of the story was his compensation deal. In his last year at the endowment he earned about $15 million, but that created a political problem. So they had to let him leave, but compensated him by funding his HF to the tune of $500 million. By then multiple list and PfOF changed the landscape enough that his strategy lost about half its benefits. They still paid him a little over $10 million.

 

[ironchef]

The most interesting part of the story was his compensation deal. In his last year at the endowment he earned about $15 million, but that created a political problem. So they had to let him leave, but compensated him by funding his HF to the tune of $500 million. By then multiple list and PfOF changed the landscape enough that his strategy lost about half its benefits. They still paid him a little over $10 million.

Nothing last forever.