Short strangles on stocks

to the opening poster:

D U H

 

come to think of it.. even if you had a whole range of different stocks from different sectors and say some strangles did better than others you still won't be able eliminate the risk of any one of those stocks going belly up due to a number of reasons, thats just the risk you take when trading stocks. It seems an ETF is your best bet, if one exits that fits your criteria.

 

if you are seeking stocks that will benefit from a short Strangle(benefits from high IV)rather than a long strangle(benefits from lo IV)AND have low correlation,then you could filter all stocks found at Livevolpro with the correlation feature at Sectorspyders or Macroaxis.com

but you'll need to be a subscriber to Livevol unless of course you already have a IV screener

 

Try utility stocks

 

Thanks for the two links, they both look quite interesting. I've been looking at the utilities and consumer staples ETFs as they both seem to fit my criteria except that there doesn't seem to be alot of liquidity. Individual stocks from both sectors might have to do, thanks again.

 

Dinamic hedging is one of the many impossible yet fundamental assumptions of the black scholes PDE.

it was put into practice a few years ago, it is partially blamed for the 1987 crash and also for the collapse of LTCM...

it normally works like a charm, but produces an abnormally large hole in the ground if it encounters any sort of abnormal situations...

 

You can put "lipstick on a pig" but it's still a pig. How is dynamically hedging different than churning an account?

 

Ok.. so the consumer staples ETF (XLP) seems to fit my criteria the best, there isn't much volume to speak of but lots of OI across many strikes.

I'm dubious about being able to get in and out of positions with such low liquidity, is that a legitimate concern when the bi/ask spreads seem relatively tight?

 

Main difference tends to be the number of people with a Phd involved in managing the account

 

I've been watching the XLP and although there doesn't seem to be alot of options action I was willing to consider it for my strategy, however I have since discovered the margins for strangles are much higher than that of stocks.

I also got my hands on a screener so I was able to filter it down to 3 stocks that traded in somekind of a range with enough options vol and liquidity to make it worth while, however I noticed the occationally large gap or decline that makes me shudder.

So heres a thought.. If I choose a few stocks that have good liquidity with low vol I can them trade strangles and also use Vix calls for a little insurance.

What do you think?