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atticus

Registered: Mar 2007
Posts: 12701

03-17-12 06:57 PM

Leaving the SPY puts unbounded makes the correlation and delta vs. var less a concern. Maybe go OTM a bit on SPY to add convexity.

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newwurldmn

Registered: Apr 2011
Posts: 2662

03-17-12 07:42 PM

Quote from atticus:

Leaving the SPY puts unbounded makes the correlation and delta vs. var less a concern. Maybe go OTM a bit on SPY to add convexity.

That's true. I think the key to hedging is the callspread instead of the outright call. Now he doesn't need to worry about the VIX going convex against the SPYs.

I like the trade better than what I was doing. I had bought Apr 23 and Apr 21 puts outright and was going to sell them in a few weeks.

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njrookie1

Registered: Nov 2011
Posts: 242

03-18-12 01:52 AM

what about a calender ratio spread on spx to add convexity?

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trefoil

Registered: Mar 2007
Posts: 3390

03-19-12 05:24 PM

Nice day so far for this. Impressive little strategy for taking advantage of the craziness in the VIX futures. Thanks atticus.
Now, how long is this craziness going to go on for? I'm hoping forever so I can harvest some truly measurable lettuce from it, but I know that's probably unrealistic.

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Cache Landing

Registered: Dec 2005
Posts: 2531

03-19-12 06:05 PM

Quote from sellindexvol66:

for any of you guys new to this april futures are 7.13 premium to spot and it will converge even with a spot vix spike to 18-19 if you hang in there. through options i'd pick short april calls, long may if you wanted to play it. there is a demand right now for april due to the etn's etc so i'm sure there's time too..and there's never a sure thing..but that one is good.

Actually, THE trade was short the MAR/APR/MAY fly EOD on friday. Much better IMO. As close to a sure thing as you are ever gonna see. Absolutely massive edge into expiration, with almost no risk.

Only posting it because it is gone now. I'm not as charitable as you I guess.

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sellindexvol66

Registered: Apr 2008
Posts: 609

03-19-12 06:38 PM

lol cache, you're funny.... let me ass ume you are no longer short may jun from 120!

short mar april is similar as long april may but the fly affords more direct hedge to short vol, hope you really did it. i was/am in none of the first two switches.

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