Short gamma trade in EBAY

Discussion in 'Options' started by riskarb, Jan 15, 2004.

  1. Hi Guys~

    Sold a Ebay Feb $65 straddle today for $6.40 -- 400x. They report next week and I believe the volty will come in to 35% after the number, potentially much lower, perhaps 30% in a coupl weeks...

    Sold 38% volty on the Feb 65 straddle -- $6.40 to the sell.

    Good trading,
  2. FWIW, it serves my interest to report the trade here -- hopefully some of you will jump on board and we can lower the implied volty in this dog...

    arb. :D
  3. Maverick74


    I'm good friends with a lot of guys in the ebay pit on the amex. Something you should be aware of. Since you have a lot of short gamma on, ebay has a tendency to come in very very hard on numbers. We are talking sometimes 5 to 7 pts. I agree with you that vol will probably come in but I would have put more vega on that play. That short gamma could really hurt you. But good luck none the less.
  4. Maverick74


    Not to bust your balls, but didn't you say you never took directional trades. You are short 12k delta right now.
  5. Actually Mav, that's not terribly directional to me, I wouldn't be concerned with 12k deltas in my account(s) -- relative to the size of the credit.

    Regarding this trade -- I've done my homework on this one. But yeah, it's carrying a lot of gamma/vega, but not more than I'm used to taking -- I'm actually going to increase size on it.

    Ebay implodes on implieds, so I am trading this for the vega exposure, no other reason...


    Thanks for the input, tho.

  6. To be clear, Ebay's volty implodes on earnings, but yes, that doesn't concern my gamma. It will be somewhat neutralized(gamma) if the stock makes a move, but I obviously have other concerns then(static delta pos).

  7. Maverick74


    I don't care if you have 100 million in your account. Directional is directional. I just thought you were this big arb guy, hence your name, LOL, that only took trades with a lot of edge. There is no edge in that trade and especially with vol that low.

    Yes, vol does implode on earnings but if you go back about 16 qtrs and look at each of their reports, you will notice that it implodes relative to the runnup it has going into earnings and in this case, vol is sitting right off it's all time lows. You may get vol to come in 2 or 3 pts, but thats it man. Plus you don't have enough vega on. There is no vega in those feb options, you should have gone further out.

    The trade I would have put on if you just want to trade the feb's is long the 65 straddle and short the 55/60/70/75 wings. But good luck none the less. LOL. I think your going to need it.
  8. Mav,
    With all due respect, I do take flyers... This is a play I make every earnings season -- and I WILL gamma trade it, if possible.

    If you think 12k delta is a lot, then that's an issue with your risk tolerance, not mine.

    FWIW, I trade neutral with the rest of my portfolio, mostly index dispersion, and I'm long gamma overall. When you see some box and roll opportunities, off-floor, you let me know!

    I trade micro-flyers all the time, that is close to my risk-limit, but I know guys a lot smaller on the floor that take much larger deltas.

    Good trading to ya,
  9. nkhoi


    arb, what I suppose to do, sell 1 65 call and sell 1 65 put, right?
  10. Right, nk, same strike, Feb call and put. Ebay has fantastic liquidity.

    FWIW, the relative implieds in ebay are in-line with the NDX implieds, I run a relative value volty-line with every equity trade I make.

    Good luck,

    P.S. I'll be sure to post the offset or any gamma-trading that's done.
    #10     Jan 15, 2004