The edge is that SVXY goes up 80% of the time. When you have 1:1 risk/reward on a trade that wins 80% of the time, with black swan protection - this is the edge. it's all explained in the article.
Not doubting you, but from the article it looks like the collar is typically above the money. This isn't the same thing as winning 80% of the time if SVXY "only" goes up 80% of the time. (I realize that part of the strategy is adjustments, and maybe that's where the extra win% is found.)
Only slightly. The put is usually around ATM. But adjustments play an important role. If SVXY stays unchanged for few weeks, the trade would be closed for breakeven or very small loss and rolled forward to reduce the negative theta.
Thank you again, but we will have to agree to disagree. I believe our track record speaks for itself. I'm a simple guy, not using any fancy mathematics, but still doing pretty well.
I took my post down for fear of it devolving into something that would just clutter the board. So, as you said, we can agree to disagree. Best of luck in the future.
Still... if you keep it in OTM, instead of the deep ITM in the next month you can just buy the same strike/month OTM put in that month. It just doesn't matter... + 120 PUT March - 130 CALL March + 50 CALL June is the exact same thing as +120 CALL March - 130 CALL March + 50 PUT June In Gamma, Vega, Delta,... everything... This is really a non-discussion. It's a fact that just about every retail options trader doesn't understand, because they lack the proper training.
Well, for the sake of keeping facts alive and to teach other traders interested in options... I'd like to keep it up. I've had this discussion lots of times already. Retail come to these forums to learn a thing or two about complex trades... I'd like for everyone to at least not be shown incorrect statements. Retail teaching retail is like a farmer teaching emergency first aid. @Kim Klaiman, there's nothing wrong with your strategy... if it makes you good money keep doing it. And your track record seem fine, so I have no comments about that. But in the end you are still not professionally trained. Not everyone needs to be... but please don't try to de-rail facts about options. It will confuse the ones that come looking for info.
@JackRab I'm not trying to de-rail any facts. I agree that that the P/L chart is the same. It is similar to the fact that covered calls are the same as naked puts, and credit spreads are the same as debit spreads. But it doesn't mean they are 100% identical. There are some nuances, especially related to IV. The SVXY trade is managed by one of our mentors as part of separate portfolio. I brought this discussion to his attention, and he said that he still prefers to do it with deep ITM calls, for various reasons. Trust me, he is a very experienced and knowledgeable trader, and he he must have his reasons. While what you are saying might be true, and thank you for mentioning it, I respect the way things are done currently, and frankly, I don't think it would make much difference.
No Kim... they are exactly the same. Implied vol is implied out of the extrinsic part of the options. Since that extrinsic part, the premium, is exactly the same for both call and put of the same strike/month... the implied vol is exactly the same as well. If the p/l is the same, than all risk parameters are the same, including true IV. You might find some inequality, but that's related to either an upcoming dividend or when there's a high stock lending fee... which would be the case in SVXY. But that's an interest rate matter and really, again, doesn't make a difference. Because both dividend and high lending fee cause the intrinsic value to drop, not the extrinsic. And by intrinsic value is meant the difference between strike price and underlying stock price including the interest rate component. You or your platform or your broker might show a different IV for call and put... but that's just a wrong calculation of the theoretical price, likely because they use the wrong intrinsic value. In the end it will make a difference, because I see a lot of people doing ITM trades, also ITM strangles... which can be done a lot cheaper by doing the OTM... which equates to the same position at all times (except when there's dividends involved).
I guess I should actually not mention any of this stuff, since retail trading ITM options is considered a money maker for every options market maker out there. My sincere apologies to MM's...