Short gamma trade in EBAY

Dang man... I know somebody's gotta do it, but it doesn't get much more depressing than Surg/Onc. On the other side, it can have some fantastic high points. Not enough to offset the downers though.

That's an interesting route you took riskarb, similar to mine in a way. I went from the pit to med school and practice then back to trading. Trading upstairs now is much nicer than it was in my day.

LOL... the internet was still in Al Gore's garage when I was at the Merc.

So back to the position - short straddles are then long delta, short gamma, long theta, short vega... is that right? Having the vega and theta in my favor as I see this... unless expecting the gappola... is cool. making money every day just to be in the position. Is there benefit to then shorting the underlying to neutralize the delta, and just have exposure to gamma risk. Or am I just waaay off the mark?

 

Hey Long,
Short delta in this case, you're on with the rest... I will agree with Mav that I should've taken more vega in trading the back months -- but I got greedy seeing a straddle credit equiv. to 10% of the underlying, and that swayed my hand.

Since the delta is bimodal(can invert) I would offset before earnings if it gets out of hand, don't want to be caught long(short) stock if the thing collapses(rallies). So, I won't be hedging before earnings.

Yes, S.O. was tough, but running an standard Oncology practice was even worse -- 70% of your patients terminal and establishing first-name relationships was too tough.

arb.

 

Hm. I don't see anything particularly compelling about EBAY's IV's now. Spot vol is down a bit recently, that's about it. I have traded the flea many times on the day/eve of its earnings announcement and it sure can be a ride. Stopped playing EBAY a while ago since my fundamental opinion (that it is a POS) interferes with my trading it. IMO one day this scam will get its haircut. I hope I have a boatload of puts on that day. But that is a digression. Good luck with the short straddle.

wee

 

LOL. You had to see it coming.

 

I guess the whole argument here is how many points of vol you want to see pre-earnings report that one should try and capture. What do you guys look for? A certain percent change or some percentile? I'm sure there's a lot methods but I just wanted to hear what some of the better options traders are doing.

 

Yeah Wee -- the spot volty wasn't an issue due to earnings, I'm sure that spot-graph will gain some strength soon enough. The implieds are certainly nothing spectacular, but I've traded a lot of EBAY, and no equity volty looks good to sell -- but if it's a screaming buy, then why isn't equity volty rallying?(rhetorical).

I'm not a huge fan of EMH, IOW, I think the volty is somewhat fairly valued by the volty traders... I wanted to trade a short volty flyer into earnings this week, and this hit my screen.

Thanks.

arb.

 

Certainly an interesting divergance between historical and implied. Should be some reversion to the mean. IMO you've got room to work with. I may be nuts but I think if there's any surprise it's to the upside with a rotation back before expiration.

 

btw, more and more physicians that i know in one way or another (thru personal acquaintence or personal illness) have left their practices to do other things. a good college friend of mine who is now a physician told me recently that, whenever a new patient walks through his door, he asks himself "is this the one who is gonna put me outta business with a lawsuit" it's really an alarming trend, but i guess we know all this. i fear that when i finally do have that massive heart attack (possibly for selling some straddles) -- all i will get when i dial 911 is "a customer service representative will be with you in 12 minutes. please continue to hold. we value your time."

wee

 

For those who are interested, here is a graph of Riskarb's position. I'm warning you ahead of time, those with bad heart conditions, do not open this file.

 

the only worry is the undercapitalized schmuck who puts on the same the trade out of respect for riskarb's ability and knowledge and then gets clobbered because he doesn't know how to manage it properly. i believe that element is the real risk when you read these boards. putting a trade on is the beginning of a process, not the end of one. the trade ideas here are often good, but managing them with respect to your risk profile is a very different matter.

wee