Do vols deciles work ?

Discussion in 'Options' started by IV_Trader, Jun 20, 2006.

  1. Maybe for LEAPS and on extreme levels ( 1,2,9,10) , but what about short term options ? I watched the VIX slowly drift from mid 40th to low teens ( and stay there for a while) during last five years. Trader who shorted vols was a big winner , regardless at which deciles he did it. Stock's price action was LEADING the vols action , stock with IV of 60 (let's say 7 decile level) moved only 50 HV , then next month its IV got down to 50 , but HV to 40.
    So stock constantly moved LESSER that its relative IV (premium collected covered price movement). Vols sellers were big winner even at 2 and 3 deciles.
    Will opposite happen now if VIX will continue to rise ? Yes , one getting larger premium for shorting , but is it enough to cover Gamma risk ? Will vise versa scenario (sold IV of 50 , BUT stock moved like 55)repeat itself ?
    Time will tell .
  2. i dunno how u can sleep at night with your trades, i know they can be very profitable but man, goin' long biotech just before report, that was quite somethin' of u, given what happened to pozn just a week before; did those puts u bot covered your losses at the end of the day[?]
  3. me , POZN ? U are confusing me with someone else , I never had it.
  4. no i was just referrin' to the massive decline on pozn as a reference for what can/could happen to the sector on bad news. u longed a bio stock hedged with puts, what was the stock, jbl?
    mind u am not criticizin' your tradin', i know u are fairin' very well, only that i couldnt in a bln years trade like u do, thats all.

    edit; well jbl is not on bio, i thot u were long on somethin in the sector, pardon me.
  5. Oh , JBL. It was a pre report vols expiation trade ; I just got lucky there with a pre-warning.
    Sure , you don't have to like my or others style of trading , everyone chooses their own.
    B , what its has to do with a theme of this thread ? :)
  6. well, u were talkin about sellin' vols innit.
    besides i didnt say i dont like how u trade just that i have not enough nutzz to do it!, those freakin' puts were flat [and calls went to shite] even tho the stock had a massive downward move, that was quite shockin' to see.
  7. me selling ??? I had 40 long ATM straddles +1500 shares overnight (total delta neutral) and I bought another 2500 shares in the pre market when price was down -16% to lock 9k in profit. I left 10k on the table , because price was down 25% later in the day.
    Reread my JBL post , I posted it as a question of how broker (IB) calculates the PnL in cases like this when long stocks showing a big loss in pre-market , BUT much bigger gains on puts (even on intrinsic bases value only )are not available ( technically) until 9:30.
  8. right, i know u were long puts into report, and i remember "u complainin'" about those puts bein' flat after a 15% decline at open, while havin' a serious loss on the common, and commentin about broker possible liquiditation. my point is i was surprised to see those puts gone nowhere at open since i was followin the stock that day. buy yeah it is tough to keep short pos/long puts 'till session end even tho it is always pretty likely stock continue to trend down. good example would be nbix last day, beautiful trend, got in 2min after open but got out too soon cuz of those first spikes drove the stock 2% against me scarin' the hell outta soon i was in the green by 2.5% i got out...regrettably :(
  9. ITM puts going nowhere at the open with 16% price drop ?