Goldman Says "Diversify By Naked Shorting Volatility"!!

Discussion in 'Trading' started by Sbelmont, Dec 20, 2007.

  1. Crap, the secret is out. Damn you Goldman.
     
    #21     Dec 21, 2007
  2. Hmmm....I guess the "when in doubt, palms out" mentality is still alive and well in the options world.

    Selling premium used to be the only game in town in the options world. People like Steve Fossett and others all made fortunes using that approach.

    However, as the volatility began to rise in the late 90s, a lot of those people lost their lunch. Fossett took a bath and dumped all of his seats on the CBOE.

    I think shorting premium is fine if you pick your products and strikes carefully. However, I would be leery to follow Goldman's advice in this market. The broad indexes "corrected" a few weeks ago and then bounced back 5% the following week. That's not exactly they type of market that you want to be short gamma and short vega in.....
     
    #22     Dec 21, 2007
  3. So does anyone have a copy of said Research Paper?
     
    #23     Dec 21, 2007
  4. BJL

    BJL

    good to see most people here distrust investing in volatility as an asset class. might be a while before institutional money will lower returns.
     
    #24     Dec 21, 2007
  5. The black swan will eventually catch up to you...don't short vol!
     
    #25     Dec 21, 2007
  6. Since the article came out, vol has increased and has even spiked a couple of times. Goldman timed this perfectly just like everything else they've done ("sell us vol"). I would have lost quite a bit had I followed their advice.
     
    #26     Jan 27, 2008
  7. Who is GS targeting re this article? Who does GS want to read and follow this? Any thoughts?
     
    #27     Jan 27, 2008
  8. their clients? This paper put out by them went to 'valued' clients
     
    #28     Jan 28, 2008
  9. Hard to believe that. Apparently everyone on Elitetrader is also a valued client. :D
     
    #29     Jan 28, 2008
  10. I was under the impression more hedge funds are moving into the option business. The GS research paper sends the newbie fund barking up the another tree.
     
    #30     Jan 28, 2008