atticus' single-name delta book

atticus · Feb 10, 2013

Quote from atticus:

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).
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In this example it would be a MIT short on ESH3 at 1475.00.

cdcaveman · Feb 10, 2013

Quote from atticus:

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).
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i'm finally getting the PF play... geez..

rockn · Feb 10, 2013

Thanks for that detailed info and link I'll check it out. I could never trade index like that (currently), but I put on similar (sort of?) spy strangle trade friday, sold March 149P/152C. Also, sold March Spy 151.

atticus · Feb 12, 2013

Quote from atticus:

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.
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Trading 75 here. I would add here if you're already in a position.

ktm · Feb 12, 2013

Quote from atticus:

Trading 75 here. I would add here if you're already in a position.
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I did the 70 late last week...already up about 5 or so.

atticus · Feb 12, 2013

Quote from ktm:

I did the 70 late last week...already up about 5 or so.
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Nice!

atticus · Feb 13, 2013

Quote from atticus:

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.
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Out at 66 on this dog.

atticus · Feb 13, 2013

Short the SPY Feb15 151 pitchfork from 2.10 (14 mid). 20% allocation (based upon RegT).

atticus · Feb 13, 2013

Quote from atticus:

Short the SPY Feb15 151 pitchfork from 2.10 (14 mid). 20% allocation (based upon RegT).
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Typo, 1.90 filled (1.30C, 0.20P). It's not filled on COB so I had to do the math, adding an extra credit on the put. It closed the day at 1.78 mid.

atticus · Feb 14, 2013

Quote from atticus:

Typo, 1.90 filled (1.30C, 0.20P). It's not filled on COB so I had to do the math, adding an extra credit on the put. It closed the day at 1.78 mid.
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Buffett rained on my parade as we were setting up for a nice fall. Out at 1.60 right here for a gain of 0.30.