I like to meet the vols seller and ask him WHY this trade looked soooo good to him yesterday. straddle was at 90c (on the bid) , that's represents only 3% from the stock's price with 3 1/2 weeks to go . BWT , MSFT did moved 5% just last qtr , I guess some have a short memory .
Mav, I tend to be a net buyer of premium, but I am curious as to what extent you believe the "sigma event" risk is or is not diversifiable? If the average occurrence of a "portfolio destroying" event was 1 in every 100 years, would you be willing to take that risk? How about 1 in 100,000 years? From your argument, I would guess that you are also a net buyer of premium/gamma. However, there is also "sigma event risk" for a net long portfolio. Is this risk acceptable to you because the maximum value at risk is a known quantity? Very generally, what is your preferred position if it is not zero, and how do you get there (without disclosing the secret sauce)? -segv
No Seg... Mav is long and short gamma, simultaneously. He's solved the Unified Field Theory and has a cure for AIDS and Herps. Now, if he can just get the techs at the office to plug in that Cat-5 cable! Mav knows I am j/k.
That's what long term capital thought before they blew up. Their simulation told them they can't lose more than a couple of hundred million in a day in 2 zillion light years and yet they lose billions in weeks. Is murphy's law, the market is there to fool most of the people in the least amount of time regardless of who you are. If you think you can't be hit by lightling while your business is to stand in the middle of a football field during rainy days, all i can say is to wish you good luck you might never get hit. There are people who survive without being hit, but not the majority of them.
Probability is a funny thing. If you walk across a street on a regular basis, probability says that getting hit by a car is inevitable. Indeed, for every day that you live, the daily probability of death approaches 100%. These people out there eating, crossing streets, driving cars, drinking booze, sleeping, having sex, and shorting premium are all crazy I tell you. I am staying in the panic room! -segv
"this is your life, and its ending one minute at a time." I papertraded a short IV play on NTRI right before earnings: IV = 70%, sold the combo for 7.70 NTRI gapped $17 Had to buy the combo back for 18.55 Loss of 10.85 which eliminated all previous gains and then some.
It's called Schmamma (being long and short gamma at the same time). Obviously you havn't read Cottle's latest book where he dedicated 5 chapters to the trading of schmamma.