Maybe it is the heat on my brain but are you Long the ES ATM weekly straddle? if so you are betting on major move and hedging with call and put spreads? Sorry just not clear to my addled brain today.
Ok so a bet on vols increasing/market making a large move. Honest question, how is the put and call spreads, assuming they are bear put and bull call, hedging that? I would understand better if you shorted the straddle and maybe added some long deltas on the wings with bull and bear spreads....
It's the lone star hedge! PS. in fairness, he acked that he's increasing his convexity and decay when he does that
Not necessarily a large move, I am more looking for multiple moves up and down, and enough of them so I can earn on the put and call spreads to pay for the straddle. So when ES increased up to 40/45 last Wednesday, I bought multiple weekly 40-35 put spreads between 1.75 and 2.25 because my risk was a reversal back to my strike (2805). That's how the hedge worked here. They settled at 5. I used to do long flies but I never really enjoyed the mechanics. What I think I'm decent at is finding areas and approximating probabilities where spot will go back to and in which timeframe, such that hedging the straddle with options will do better than with futures. Also, I calculate my Greeks in my own way and decide the amount/time to hedge based on these personal assumptions.
Great state! Pretty women, good food, lot's of open space PS. as an aside, Texas hedging makes perfect sense for farmers, since their risk is usually correlated with their output. E.g. prices go up when there is a drought, but a farmer has nothing to sell