IV on the qqqq's looks low, looks like itm puts selling for 16.45%. I may give it a go and scalp gamma's. Any thoughts??
nice price reversal today...probably paid for rent. Just wondering , why ITM puts and not OTM calls ?
I do a quick and dirty, back of the envelope calculation when selecting put vs call and selection of strike. I look for the highest gamma divide by theta. Not very elegant but it has worked for me in the past. I'll go with something not too far out of the money. Today I went w/ 52 puts. I really like using the straddle but I don't like paying 2 bid/ask spreads as you pointed out in a post months ago. The trade was working out nicely but I had to leave for work at 2:00pm so I left some limit orders. I'm not thrilled w/results so far. My hedging is typically a bit squirly the first day I put on of these on. Tone
if price goes down , your itm's gamma is shrinking ( hence , less # of shares per adjustment)...For the last four month I enter via short stock+long otm calls only. Love it. If my calls become ITM , I will swap them with the next otm strike ( delta per delta) . This way I am getting more gamma and cheaper vols ( due to skew).
If you're not trading the underlying the the gamma is not helpful and the call and put of the same strike same month have basically the same exact gamm and theta, oh and they're always 100% inline with each other as far as the correct premium.
I haven't tried the short stock+long stock order functionality on tws. I'm going to give it a try next position. I have rolled strikes when using straddles but recall getting hammered on bid/ask. Looks like I'll get some stat vol this morning. Your comments are really appreciated.
I don't usually trade options on an underlying as uber-liquid as qqqq. I agree with you and probably should have looked at the calls closer on the qqqq. My experience on less liquid equity options is that the puts give a little more gamma per theta. Possibly due to market conditions at that particular times. Maybe due to the carry on the long stock required to hedge. I definitely am trading the underlying........Tone
true , the rolling is expansive. I will roll only if favorable conditions are still = true ( which are future vols ramp in my case)
The put and the call of the same strike have basically the same gamma and theta. What you're missing is that the if you're long the call the options model assumes you shorted the stock. The difference in the theta between the long call and long put is the interest you'd have collected on the short stock ( in the case of long call ) vs the interest you'd have paid on long stock ( in the case of long put). Since you're NOT trading the underlying it would appear to you as if the theta on the put is a touch lower. The amount is barely noticeable especially in short dated options
Q^4 is arbed into oblivion, so don't concern yourself with put vs. call. They're going to trade within a tick of the conversion/reversal arb. IV is 18.50%, not 16.50%; still cheap. Going with the synthetic [puts] on the straddle doesn't make a difference, as the synthetic requires 2 puts vs the equivalent put.call straddle. Microstructure aside, they're the same animal.