Yes,I am typically long 1 short 2/3..Rarely backspread,except when I roll my long call strike up.or long put strike down... I believe/hope for sticky delta.... FWIW,I am essentially a market maker and if I get legged on the short side.I scramble very quickly into a ratio...And I limit ratios to large cap liquid names,much larger on the upside...
If I remember correctly,Meriwether was leveraged something like 50-1 and grinding out 50 bps per trade..Over-leveraged was the issue
Over-leveraging for overtrading. When you have so much exposure that a financial crisis can take you completely out, you have overtraded.
why would you want to be long a stock that you expect to rally less than the premium of the put. if you have the view that the stock won’t rally much, you shouldn’t want to own it. But now you a view on volatility (to my earlier post) and selling a straddle might be a good trade.
read when genius failed. It’s a fascinating story. the didnt blow up because of options. They blew up on three things: Bond spreads blew out They were the largest short in spx variance. They understood all the Greeks but one: hubris. (To quote an ex-colleague of Taos)
I am sure the book is fascinating but to me, there is no "genius" in trading. Trading is just risk management. Everybody is on borrowed money. Eventually everybody gives back. It's just a matter of when. Lehman Brothers lasted for 161 years and Bears & Sterns toughed it out for 85 years. The goal is trying to last as long as you can and make sure it doesn't happen in your lifetime and/or the lifetime of as many of your descendants as possible.