Hedging the wheel

Who? I was looking at this one (remove spaces to get the URL):

https://www. amazon. com/Superior-Persons-Book-Words/dp/0440204070

 

Don’t get too heavy on him. He’s only following the terms of his IB agreement where it says he needs to make average people feel that trading is something better left to the professionals.

 

"The Thinker's Thesaurus" by Peter Meltzer. Wierd my Amazon links not working. Anyways, it's a great read for the upcoming holidays, if you like that sort of thing.

 

Oops. I must of hit a nerve. My IP address was banned. Too funny.

 

Thanks Dest for your thorough response. I appreciate. If you are willing to answer a few follow-up questions...

By sticky delta, I think you are describing this:

https://www.math.columbia.edu/~smirnov/Derman.pdf

But what are global implied volatilities (strips)? The slides seems to describe the change in ATM IV with respect to change in the price of the underlying as following either a sticky-strike, sticky delta, or sticky-tree implied tree model dependent on market conditions (complacent / greed, fear, or correction).

Also, you mention that the skew is flat, but this looks like strong negative skew (Nov 2022 expiration):



I must be missing something. How does this chart predict forward (which I assume means future) volatility? Under the sticky strike model, ATM IV drops as underlying rises in price. Under sticky delta model, ATM IV stays the same as underlying increases in price, IV of strikes close to ATM (local?) rise.

 

the 3x has a path dependency the 5x doesn’t.

 

I usually roll before the the strike is deep ITM if I don't want to take assignment (short put) or be called away (covered call).
Roll as soon as price reaches your short strike.

 

I'd appreciate it if you could expand on that a little. I thought that only exotics were path dependent.

 

I use a normed RR model across all tenors. There is an arb-condition when the figure reaches 1.8 and we're currently running 1.3 which is bottom three deciles on index skew. Above 2.0 there is an arb-condition in a complex combo. 1.x does not related to pwing/cwing vols. I can't elaborate as I am running a seminar and it's the highlight.

Strips colloquially as VIX, varswap. (-)spot/vol correlation. Above say 25 sticky strike dominates; below, sticky delta.

 

I'll have Neww answer, but there is PD in leveraged ETFs and well, vol, when you're discussing time series (tenors).