SPX Credit Spread Trader

Discussion in 'Journals' started by El OchoCinco, May 17, 2005.

  1. riskarb of all people would never recommend selling straddles for a living. Perhaps you missed the point in his journal where he was suggesting diversifying tickers with 1-2 lots while keeping the notional risk in check and having a hedge against a correlation under a 2+ sigma move. His journal was more of an education tool than a way to make a living.
     
    #11871     Nov 11, 2006
  2. kapil

    kapil

     
    #11872     Nov 11, 2006
  3. Donna,

    I don't know what happened to RA, but I feel very sorry to hear that. He has been a virtual mentor to me. May God comfort him and his family. I wish we care each other in this group while we learn from each other.
     
    #11873     Nov 11, 2006
  4. Does anyone here do the remote market-making from their house (or anywhere else)?
     
    #11874     Nov 11, 2006
  5. I saw mention of the hedge but no specifics. I have seen riskarb post positions short gamma without a hedge (both vanillas and exotics). Regardless, the journal was just an example (perhaps not making my point concrete). All I'm saying is that people can sell premium (naked) successfully. Should you or could you is not for me to say.

    If you disagree then we disagree.

    Cheers
     
    #11875     Nov 11, 2006
  6. Recent posts have turned a little contentious, but that is not all bad. In fact, friction can bring forth information in a sequence that makes for better absorption by the reader.

    The “Sigma 10” catastrophe event discussion from earlier has now been driven home by the crowd who prefer “bounded short gammas” hedging techniques versus simple vertical spreading or outright short premium. A google search turned up this: http://www.crest.fr/pageperso/touzi/st04.pdf

    The math blows my mind, but it sounded like something akin to the current topic. BTW, a simple example of ‘bounded gamma’ would surely be appreciated… as would ‘selling premium against gamma curvature’ (which sounds like the same thing). Yeah, I know what the greeks are, but I am in kindergarden as far as knowing how to structure trades with them. And if no illumination is forthcoming, no problem… I’ll dig it out on my own.

    BTW, a ‘Sigma 10’ event would give most traders/investors the ‘willies’. I’ve got a few investments fully hedged with LEAPS that could benefit from serious underlying appreciation, but will otherwise either break even or return about 1% APR in dividends after being reduced by the cost of the LEAPS.

    If some of you have figured out how to hedge against catastrophic mkt events thru structured Option positions, while making serious profits w/o the bad things happening then kudos to you.

    There are some sharp folks participating in this forum, and I am getting a better education from you than from a dozen books on my shelf about Options.

    I’m still plundering thru a year and a half of posts and enjoying the venture, all the while keeping up with the current dialog. Gees… you guys do like your acronyms don’t you!

    Anyway, thanks for the education.

    Mech
     
    #11876     Nov 11, 2006
  7. RCMLLC

    RCMLLC

    Healthy discussions here .... just remember that this is a public forum and nobody owes anybody details of his/her trading strategies.
     
    #11877     Nov 11, 2006
  8. There are many ways to bound gammas or sell premium against "curvature". A short vertical is a simple example of bounded gammas. A calendarized backspread is a simple example of selling premium against curvature.

    The theme of net owning gamma(curvature) for cheap or free through vega is a common one among floor traders and professional option traders. It is more of an inventory(month to month) type of approach than a simple long/short delta/vega bet. The art is in finding a way to pay for that vega in a risk/haircut efficient way. It is usually done through theta or flipping spot/short duration paper or some combination of both which may include some vols/skew flattening bets. That's where one's trading skills come in handy and make or break one over the long term which is precisely where mav's experience comes into play and no one can blame him for keeping things behind a curtain.
     
    #11878     Nov 11, 2006
  9. Thanks. I'll be awhile trying to get my head wrapped around that.
     
    #11879     Nov 11, 2006
  10. Flipping through Oct's Opt mag you run across yet another premium selling HF manager, this one ICs. Question for those of you who've been around the block for awhile - how much more room is there for all these newly minted ex-software execs turned CTA gurus?

    VIX lower and lower with premie and vol shrinking from imbibing Alice in Wonderland elixir. Gamma becoming so cheap as to be irresistible. What will it take, a sigma tsunami to flush out all the partakers?
     
    #11880     Nov 11, 2006