Not much to lose into the rally due to sticky deltas. You'll see a vol of 16% on the up and out strikes. I can't imagine it will trade much under 16% atm.
Out of curiosity, do you believe that spooz skew is sticky delta? Cause I've looked at it a lot and it feels ver much sticky strike to me - fixed strike implieds are far less volatile then fixed delta, at least historically. The skew already compensates for the vol increase in a sell-off and the only time you would care about doing calendars preferentially in calls or puts if you think that the implied vol there is inconsistent with where you think implied vol will reset when you get the (you think the skew is mispriced). Main reason to do calendars in OTM strikes is obviously to benefit from AC.
So I went into thinkBack to test this out. I just happened to pick last July. The first week I tried the SPX was at 1027 on July 1 so I went out to 1075/975. Guess what? A week later it had just 50 points to 1077 on July 8. Luckily it was close enough to the strike to still make a profit. Depending on which day you carry it out to, the 8th or the 9th, the long side was either -282 or -222 and the shorts were either +377 or +505. I am still not sure what TOS uses for it daily prices. When you open a position it looks to be based on the closing stock price for that day. The SPX weeklys expire the same as the monthly, on Thursday with Friday AM settlement. Looks like the SPX closed at 1077 on Thursday and opened at 1070 on Friday. If I were doing this with real money there is no way I would not close out on or before Thursday. Anyway, I just thought it was interesting that the first one I tried went to the max of the range.
I was saying that _at least_ he should do that. You can make yourself a more complete model that would include a variety things like level of the underlying, current risk premium etc and go as complex as you want. I do a bunch of things in addition to the above but that's the secret recipe that makes each vol traders strategy unique
atticus, as is your wont, you have something snide to say about me. I don't recall making a sales pitch to anyone. And, btw, I use my REAL name, can you say the same, or is atticus a pseudonym? You really need a twelve step programme. Josh
Hi Josh, out of prison yet? What [Joshua Fry] didn't reveal to Internet surfers was that he was offering his $500-a-year investment advice on the Web while a guest of the Maryland Department of Corrections at the Jessup Pre-Release Unit, where he is serving an eight-year prison sentence for securities fraud and theft.
Using your real name provides credibility? ET posters are usually judged by the content of their posts (accuracy, knowledge, helpfulness, etc.). Table manners are optional.