Karen the Supertrader - TastyTrade Hybrid Experiment

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

  1. atrp2biz

    atrp2biz

    Agreed, but even this is not too bad a scenario. This is why Bobby carries a 1:2 delta:vega ratio. I think you have to hedge to the extent of at least flattening delta. If you get whipsawed, at least vol will come in.
     
    #831     Sep 30, 2016
  2. Daal

    Daal

    A big potential whipsaw is the 'take losses at 2x of max loss' that Sossnoff advocates. In a bear market vol of vol is likely to be up a ton. As a result he might get in and out of trades over and over again. This has the potential to exacerbate losses
     
    #832     Sep 30, 2016
  3. Daal

    Daal

    Not to mention that its a contradiction with his market beliefs. If market insurance is consistently overpriced, why get out when people are trampling over each other to buy more of it? Because of risk management? Well, then you probably oversized to begin with
     
    #833     Sep 30, 2016
  4. TD80

    TD80

    The whole key to this thing is managing losers. This is a huge point of disagreement between myself and Sos.

    Anyone who has done this long enough will realize that convexity kills, it not only kills if you are leveraged, but it kills your average return over time even if you are cash-secured and do nothing.

    So Daal I can't disagree with you more about why stop out / why not just stay in to expiry and use less leverage, although I realize you may be trolling a bit here RE: "Set it and forget it" mentality (in which case we agree). You MUST have an exit (or direct hedge) plan in place or you will not realize an optimal long term outcome.

    Premium (especially on the SPX) is absolutely overpriced over the long run but it can be vastly underpriced on occasion.
     
    #834     Sep 30, 2016
  5. atrp2biz

    atrp2biz

    I don't agree with the 2x stop rule. I think this is more for isolated positions. I just care about the net effect of the Greeks on my various positions in a particular underlying.

    I do agree with rolling up and down positions to adjust delta which keeps you in the position and able to take advantage of the higher vol.
     
    #835     Sep 30, 2016
  6. TD80

    TD80

    The problem here is that one can end up getting really crushed on a meltdown. One-way directional risk of accelerating magnitude can bury you if you keep rolling down/out. I'm sure some people got murdered in oil when that thing trended one-way in a death spiral trying to roll down/out on the put side of CL or USO or whatever.

    Occasionally markets make one-way parabolic-ish moves, I would suggest modeling some way to step aside. 2x credit received may be crude but it probably works to deal with this sort of scenario.
     
    #836     Sep 30, 2016
  7. atrp2biz

    atrp2biz

    I don't agree with this. I wouldn't exit any short premium positions outright when volatility expands. Those are the opportunities that short vol traders have to take advantage of. Again, this is why it's important to maintain negative delta so you don't get hit by both the delta and vega bus (as opposed to the venga bus). I understand gamma is around the corner, but the delta will provide some initial protection.
     
    #837     Sep 30, 2016
  8. TD80

    TD80

    This may be of some interest (I neither endorse nor deny TT methods, but occasionally there are some interesting research notes)
    :
    https://www.tastytrade.com/tt/shows...odes/covered-strangles-short-stock-09-28-2016

    At least in broad American stock indexes, which have a very strong long-term upward bias, I would suggest maintaining short deltas all the time is not optimal.
     
    #838     Sep 30, 2016
  9. Flynrider

    Flynrider

    Aren't you forgetting an important Tastytrade suggestion to generally sell options only when IV is high (e.g. >50% IVR or IVP) vs. regardless or IV? This is where needing to diversify your underlying becomes necessary if you want to be continually in the market.
     
    #839     Sep 30, 2016
  10. Daal

    Daal

    dude, he only wants to work 5 minutes a day
     
    #840     Sep 30, 2016