trading long short using options

Discussion in 'Options' started by twotime, Jun 16, 2005.

  1. twotime


    Hi there,

    I trade alpha on correlated stocks. Some of my analysis seem to suggest that the spread, mean reverts faster than one would expect of a random walk.

    If this is the case then selling the vol appears to be a reasonable stratergy using options.

    So if i am long share A short share B --Then to sell vol i'd write a staddle option

    sell call A sell put A (at them money in all cases)
    buy call B sell put B

    Does this seem like a good stratergy or am I better off just sticking to the long short futures?

    ( I am hoping to eliminate some of the risk of the spread increasing in return for less upside)



  2. or expand faster. i was thinking doing
    bearish call spread on short
    bullish put spread on long.