Credit spread 1:1

Discussion in 'Options' started by wxytrader, Nov 30, 2023.

  1. destriero

    destriero


    You don't get it and I don't care enough to explain that image. You said spreads with different strike performed differently... well, no shit.
     
    #21     Nov 30, 2023
  2. destriero

    destriero


    bc ur stupid.

    Why buy a deep itm call spread at a 99D when you can buy a 1D put spread?
     
    #22     Nov 30, 2023
  3. TheDawn

    TheDawn

    Yes that's the tricky part of options trading. Everything is priced according to implied volatility but your profitability is determined by real volatility and how different it is from implied volatility.
     
    #23     Nov 30, 2023
    JamesOptions likes this.
  4. taowave

    taowave

    A wise man would sell a 2 pt box at 2.73

     
    #24     Nov 30, 2023
    newwurldmn and destriero like this.
  5. So these are the variations of a box spread?

    box.png

    Anyway the topic here is about how a credit spread will outperform a debit spread for the same directional bias.
     
    #25     Dec 1, 2023
  6. taowave

    taowave

    Surely you jest .....

    How many hours have you been at this??

    I'm talking trading










     
    #26     Dec 1, 2023
  7. destriero

    destriero

    bc the vol surface isn’t flat. Same strike ps and cs are governed by the box arb. An atm cs is the revenue side of the fly on index, provided you are accounting for the forward (atm basis for both). Why? bc upside strikes are -skew on index.
     
    #27     Dec 1, 2023
  8. destriero

    destriero

    Take an equidistant otm cs and ps on index, but within say 30-delta. Equidistant priced against the synthetic at the expiration in question. On index the cs will trade at a larger figure than the ps. The box arb reflects the synthetic of EITHER spread, not the relationship between an otm cs and ps.

    in singles; puts are the revenue side.

    in verts; cs are the revenue side.

    it is NOT governed by any arbitrage constraints (ostensibly would be arbed away). It’s the origin of the term “risk” reversal.

    an atm synthetic long or short is the forward. Long c, short put at x. Long the synthetic and short spot = reversal. Separate strikes and you add risk, and skew, thus a “risk” reversal. Skew cannot be arbed away hence the skew/convex vol-surface (smile).
     
    #28     Dec 1, 2023
  9. How many Lambos do you have again?
     
    #29     Dec 1, 2023
  10. I'm accounting for either direction where the short call vertical (index) will result in better gains and less losses.
     
    #30     Dec 1, 2023