i guess (being a newb to option trading) i just gravitated to the stocks that look like the 'good old days" without knowing it. actually, it's not like i started thinking about this because i had insight- more a case of having a 5,6,7% move in the stock and still getting killed by the IV dump a few times. i guess the aforementioned MSFT example shows the 'bad new days' when the IV has a horrible r/r profile. obviously MSFT has a much higher correlation to the VIX than an ISRG...
What would the MM haircut treatment be on a fly dispersion/vol arb strategy: short index straddle + long component stock strangles. Do you get relief on the short straddle haircut from the component strangles? Slightly OT but you mentioned the overnight haircut issue so... MoMoney.
No, but your haircut is very generous in this example. You put up little next to nothing for all your long strangles and your short index trade gets very attractive haircut treatment especially if it's the Dow or S&P. Nasdaq is a little higher. No way you could do this on retail margins.
be careful , MO . The January dispersion would of be a huge loser when Index ( I do DIA) and almost every component went the same direction. Three out of four legs ( except of short put on the index) were a losers. In the matter of fact , reverse dispersion is the way to go lately ( two months out of three)
sorry for what is probably a very basic question (my brain hasn't been used for much mathematics since roughly 1985). what is the equation for calculating my maximum loss in any long/short strangle scenario? an example: short 45 puts short 55 calls long 35 puts long 65 calls obviously this would imply holding to expiration (which i wouldn't do, of course). with that in mind, any recommendations as to software that does a reasonable job projecting the post earnings IV drop and, based on that, plotting the projected next day position P&L on a graph? or even software that lets me plug in different next day IV's to plot the projected contract prices at the various IV's i input? if there's a trading/brokerage platform that has this capability (ie tradestation or IB), all the better. thanks (and sorry again for the lame newb questions).