Karen the Supertrader - TastyTrade Hybrid Experiment

Discussion in 'Journals' started by Sweet Bobby, May 18, 2016.

  1. atrp2biz

    atrp2biz

    I agree that there is an 'unknown' component hence the long-term relationship. But there's no disputing that IV > HV or RV in the long-term. In the end, that's all that matters to me.
     
    #541     Aug 25, 2016
  2. Maverick74

    Maverick74

    But that doesn't mean anything. LOL.
     
    #542     Aug 25, 2016
  3. atrp2biz

    atrp2biz

    It matters when I get paid based on a higher IV as compared to the risk I realize.
     
    #543     Aug 25, 2016
  4. Maverick74

    Maverick74

    I don't think you have analyzed the true source of the p&l. But it doesn't matter. It's your money and I'm beating a dead horse here. I wish it were that easy to just sell risk premia and enjoy the generosity of the market.
     
    #544     Aug 25, 2016
  5. atrp2biz

    atrp2biz

    It is that simple. It's the principle of risk aversion and utility.

    To each his own.
     
    #545     Aug 25, 2016
  6. atrp2biz

    atrp2biz

    It doesn't matter why IV > HV. But if we agree that IV > HV isn't that the end of the story?
     
    #546     Aug 25, 2016
  7. newwurldmn

    newwurldmn

    The risk premium is due to the fact that the market is net risk averse. They would rather eat a 1-2 vol loss than earn a 1-2 vol gain and risk blowing up.

    If the implied vol is 12, the market is probably forecasting 10. That's why implieds are always > realized in "normal market conditions"
     
    #547     Aug 25, 2016
  8. newwurldmn

    newwurldmn

    You will probably lose if the market rallies.

    That's the problem with short vol. you can't escape the gamma curve when volatility picks up. You can only shift it around.

    Mind you, I pretty much only sell vol, and I spend most of my trading hours focused on all the bad things that can happen to me.
     
    #548     Aug 25, 2016
  9. atrp2biz

    atrp2biz

    I would agree 100% as I mention risk aversion a few posts up.
     
    #549     Aug 25, 2016
  10. stuntman

    stuntman

    The skew didn't exist prior to '87 right? Or am I getting that confused?
     
    #550     Aug 25, 2016