Referring to partials... it seems like it would be a dgamma/dvol sensitivity, but it doesn't make sense that it can exist outside of the arbitrage.
OK,let's quit with the arguing and try to make some money.i have something in my head and would like you to tell me what do you think. the strategy is based on gamma scalping ,but trying to reduce time decay+getting a boost from the change in IV. SPX-long futures,long puts,but part of the position will be neutrulized with long OTM time put spreads ,which will allow less ATM puts-couple more long deltas on the futures against less deltas on ATM puts,which is balanced with OTM long time put spreads. the other thing-the scalping-if the IV rises,instead of scapling with futures-scalping with OTM and ATM short puts. if a move with no IV change-scalping with either futures,either short calls,depending of how positions at that time,......and if a move with falling IV,than scapling with buying OTM puts,instead of closing futures. would apriciate some comments,even if they are brutal jokes of how stupid i am and that first i need to learn to spell,a then to play options
You guys want numbers. I ran it on my sim.(Hoadley on Excel sheet) . Stock at 40. Choice between buying a 35 oct/sep call cdr vs. 35 put cdr. Using 45 iv on both,with Iv going up 2% on a 2 sigma move and iv losing 2% on an equally up move. ( canned simulators can't do this since this is home cooking) First, the debit is within $4. ($55 vs $51.) The expected payoff using a single probability distribution curve ending at trade date + 19 days is $114 vs. $116. Translation. Put call parity wins again.... otm put spread = itm call spread.
It's a vol-line/contamination play. If you're right on calendar-deltas you will likely earn on the vol-line, but lose a bit on skew, but the gains from vol are > the loss to sticky-delta. I suppose you could simply increase the long futures delta = the delta on the calendar at inception and hedge discretely from there. You may want to lean a little heavy over modeled local-delta due to the dvega/dx sensitivity of the calendar-addition. I've done it, but I limit gamma-scalps to the book figure, not individually.
well....i thought that we stopped arguing about this,but looks like not really........ first there are some books, writen by "professors"who can not make money on their own ,so they write books....... in these option books is said,that horizontal spreads are syntetic and are the same...... then, there are more serious books(like volatility prising or trading options greeks),where the writers are saying-they are syntetic,BUT YOU HAVE TO CHOOSE CALL OT PUT SPREAD BY CHECKING THEIR PRISE,BECAUSE THEY ARE PRIZED DIFFERENTLLY ......... now.....i strongly recommend you ,when you open such a spread,first to check both of them,because most of the time they are with different premiums ,and you you be surprised how often ITM time spread is CHEAPER than OTM one.. now,let me ask you,why is that happening,WHEN THEY ARE THE SAME???? and not to start listening about dividend in prising "explanations"...... lets get an example with SPY...... time long spreads 90 strike sep/dec: ITM call spread sep/dec 90 strike=165$ premium OTM put spread sep/des 90 strike=215$ now,is there anybody,who would be so nice to explain me,why there is a 25% difference in the premiums of these "identical" positions? Mushinseeker,let me quote you again-you are saying: "put call parity wins again,OTM put spread=IMT call spread....." so,let me ask you: 165$=215$????? well,well......quite a dilemma...... or as i say before-time spreads ITM/OTM are the same........,but not really
Let us see monday when I pull quotes from the spy to see if you are correct. Some of those marks might be stale or off of last prices and not NBBO. I can't think of any reason why the jelly roll pricing would persist except for a few lots since the arbs would set them right once discovered. You might see that difference for a few seconds or for 5 lots.It simply can't persist. I am curious about this and will pose the question to my AMEX colleague who has been trading on the floor since he is more experienced in equities- maybe dividends/or stock loan issues might make the put/call parity off by a little.
the DEC options price in the next quarterly dividend of about .50c or so, that's all. when SPY goes ex-dividend, it drops in price by about .50c, so the options are priced accordingly. the difference between the call and put calendar at the same strike and is a reversal on the front month vs a conversion on the back. the short stock of the reversal cancels the long stock of the conversion and you have the jelly roll, as mentioned above.