Boy, you are thick. If the options are not available I can trade out of spot leaving the naked option. That was my contention from my first post on this thread.
The thread was about the equivalence of the natural straddle vs. the synthetic straddle, and trading the underlying vs each. Is there a reason you need to start with insults?
I never made issue with equivalence. I made an argument for execution. Options are vol. I can trade vol AH w/o the options in trading away spot. That was my point. I realize it's not your point. I also realize I was not clear with my initial post when stating "out"
Are you saying that trading the underlying after hours vs the synthetic straddle is somehow different then trading the underlying in after hours vs the natural straddle? The original question was about trading the underlying vs the straddles. Underlying being baseball cards or whatever you like.
I'll repeat my last: "I never made issue with equivalence. I made an argument for execution. Options are vol. I can trade vol AH w/o the options in trading away spot. " I cannot trade vol in the AH if the natural straddle is held and the options are unavailable.
Its not worth the effort at this point. The question was about the equivalence of the straddles. Trading spot vs either one w/o the options is not trading vega. You can have the last word. Have a nice day.
About what I expected as my last cannot be disputed. You're trading vega when taking spot out of the synthetic. I never questioned equivalence.
I'll go ahead and dispute that. You seem to be saying "options are vol and I can trade vol by trading something other than options". Can't say I see the logic in that. It's like saying "bananas are yellow and I can get yellow things by buying cucumbers". Spot has no vol. Spot is pure delta. You can trade spot against a natural or a synthetic till the cows come home, but your gamma and vega won't change one bit till the opening bell sounds and you trade an option. I would love to see an example of how trading spot changes your vega or gamma. Make it a nice simple example so idiots like me can understand your genius. While you're at it, maybe you could explain why your synthetic has different vols from the natural, since trading spot against the natural supposedly gives you a different result.
You and xflat are right. You don't change vol sign or magnitude by removing spot from the synthetic. It only impacts upside gammas/deltas. Synthetic and natural vols are strike-equivalent. Trading out of spot against the synthetic impacts delta and gamma. I realize I implicitly-stated strike vols would differ, which is not my contention, although I've stated otherwise. Not stated, but the assumption was that the options would be made otm via AH-action, changing the vol-line via skew for the naked position resulting from the spot-offset, but I never made that case for strips vs. sticky-delta. In any event those would only be impacted after the trade was isolated to the naked calls. It doesn't change the vega. My apologies to xflat.