great job...very impressive stats!!!!! so much for these guys digging for edge by saying you can't beat the algo's lol ps: i just love the sell vol idea!!
Thanks. I sold the vol into the close in SPY. I paid just under 0.73 with comms to buy the Feb15 49/51/53 fly. It went out at 0.70 mid, so it's not material that I am posting it late (unavoidable). 15% allocation.
Doobs asked about the Mar14 SPX 1475 pitchfork and I think it looks decent here at 77.40 mid. The ATM combo is 40.75 mid (*2 = 81.50). The risk to strike at flat-vol is <4.10 (81.50 - 77.40). Strike vol is 250bp over ATM.
Sold it at four cents. Worth a shot, but contributed mightily to my 17k in realized loss. Was not a journal trade.
Selling the 1475P/1475C in a 3/1 ratio. The risk at the short strike under a flat vol scenario is ~4.00 based upon the mark on the ATM straddle. The risk at the short strike dissects to 4 ATM options, so we take the current ATM straddle premium (*4) as the benchmark to derive the risk of touching the 1475 strike. There is impact to symmetry and convexity (concavity) as sticky delta. There is an assumption under a static vol-surface that the OTM vol will converge to ATM vol as spot approaches strike. Of course the strips (unweighted strike vols) will rise if we drop, so a static "evolution of vol surface" scenario is not likely. It's beyond this thread, so you should google sticky-delta. Gains from symmetry Gains from "stickiness" Loses on strip-risk on mkt drop Loses below strike on delta(gamma) Upside risk contained by size (ratio). Skew increases on our position as mkt rallies, but the risk is materially offset by a drop in strips and that we're not geared (as stated) on the upside. They are initially neutral to delta, but the gamma-risk is represented in the puts. You can ignore 25% of your gamma figure as all the leverage is in the puts (gamma and speed). I had a thread devoted to pitchforks and I traded one in the ES for illustration: http://www.elitetrader.com/vb/showthread.php?s=&threadid=244704&highlight=pitchfork I use the PF figure to monetize skew rather than something I trade frequently, but I trade 2-3 per month, mostly with OPM. Not mentioned in the PF journal, but I usually have a limit-sell order resting on index futures for gap-risk. Typically 10:1 (puts over short futures).