Well I'd like to think that prices could only go down to zero and not lower :eek: So, technically limited reward. That page also says it is volatility neutral which isn't neccessarily true so basically take that piece of $#@% for what it's worth: pretty pictures. Yes it's a directional bet, if strikes are close together, not much different to short stock.
Ha! You are persistent, I'll give you that. The answer is no I'll refer you to the first sentence of Phil's second ever post on this journal Yes, there was a flurry of posts in reference to Dan Sheridan and the likes of "ears" on iron condors etc. but to be honest I wasn't really paying attention. It's all a variation on a theme: long premium to protect short premium. Proactive vs. reactive. I'd rather have the "ear" without the iron condor though.
The purpose of implementing a R/R // futures is to replicate gamma into otm vanilla and exotic options. A R/R can carry shadow-delta > 100 due to +vega and skews. They are split-strike synthetic futures w/tons of convexity and slippage. I love them, but they're not a trading vehicle for intraday strats. The above caveat aside, they're an excellent gamma replication for dotm verticals(not recommended) in lieu of futures[overhedge on static gammas].
IOW, it's impossible to flatten gammas w/o taking on more risk with futures than is embedded in the spot-position. This is especially the case with exotics due to convexity-slope. Deep otm verticals carry similar gamma attributes. The g/v convexity of a R/R is the best hedge in the direction of spot-risk.
Coach I am looking into options on futures for SPX and RUT hedging. Any idea when OX will provide them?.can we get to see the quotes in any other sites?. thanks
It is highly unlikely that OX or ToS will have options on ES or ER2 futures. It requires a different type of account and clearing and the ToS guys, who would love to have options on futures, told me it is unlikely right now given all the hoops and requirements they would have to meet/do. Perhaps ToS will have it in a few years but for now, only IB has em at the discount retail level among the firms we discuss here... www.cme.com will show delayed options on futures quotes...