It would make thinks simpler if atticus cleared up the Neptune Affect as I mentioned in this post: http://www.elitetrader.com/vb/showthread.php?s=&postid=3239142#post3239142 atticus could you please chime in? Thanks.
You're quoting a strangle. Also ok, but will lose more gamma (than the straddle) when/if the underlying trades to mid-point (~delta neutrality), while the straddle's gamma is greatest at DN.
Thankyou Atticus I think what I plan to do, is put on another CASH MONEY Long Straddle at QQQ 90 thereabouts, Delta Neutral. Then to see what would have happened, will put on a "paper trade" using your ( Atticus ) biased +25 Delta Strangle. Then I can compare one against the other in performance and learn something. In my myriad columns of stuff volatility relevant. The only two columns with actual forecast ability, seem to be the ISE over and under IV and HV calculations and the TR ( true range ) I don´t have a TR for QQQ, but am using the OEX which I can get and they run parallel, at any rate. The TR and ISE figures seem to give the same indicators of when to buy a long straddle. That may be of use to somebody. The P & F chart seems to be indicating we will meet resistance at QQQ 60, be interesting to see if it breaks out. Currently the QQQ index is 58.85 and it should stall out another point up. I want to get out if I have a profit when it stalls. It may not be enough? I´m holding two CASH money, LONG STRADDLES. I´m also planning to add a 3 rd long straddle, which more or less uses up all my gambling cash availability, unless that QQQ 57 Straddle turns profitable and I can close it out, to release more cash. Even though the index is going up, slowly, the IV is also slowly dropping, which reduces the premium one gets. Though the ISE calculation, says this is the time to buy the long straddle as it is underpriced. Interesting to see I´m getting some information out of these volatility studies. Whether I´m interpretating it properly remains to be seen. Kind of forgot to put on the long straddle overnight trade in the weeklies yesterday. But did it this morning using closing figures, to see what will happen. This is experimental paper trading. One of my experiments in paper trading, in puts, lost -$157. So I have reversed that trade to CALLS and will see what happens. Trying to find some sort of rythm here I can use straight CALLS and PUTS. I put on a paper trade with the 56 PUTS in QQQ, to balance by dynamic hedging the 57 Straddle I´m holding in cash. I can´t figure how it is going to help? It seems to be an insurance policy in case the market reverses at QQQ 60 which is possible the P & F chart says, in which case I can keep holding the 57 Straddle and any gain on those PUTS would offset the loss of TIME DECAY or THETA experienced by the two weeks holding the 57 STRADDLE. This is the theory behind it I presume?
Ha! Ha! Ha! Eudamon I get your point. Still I´m trying to calculate what is the best way to go and people throw terminology and jargon at me, that I do not understand. So attempting to do them in paper trading is my way of at least acquainting myself with the terminology. On the other hand, it is a process of elimination of data people disseminate, for which I have no reference and wonder if I am missing something? By the way, got a question for you? How long have you been trading your long straddle system, with cash money?
VEGA I see by my straddles that Vega on the CALL side has dropped from .10 to .09 and today .08. I have no clue what that is telling me? On the other hand, my TR ( true range ) figure seems to give me something the same as VEGA? I´m getting a trend, but what kind of trend? What is the nitty gritty of this stuff?
About 20 years for the general idea, but I'm always still tinkering with it for the execution, which is always harder than theory.
Think of vega as synthetic time. There is less time for the move implied (in the premium) to materialize. It's not linear (application of root time vega) as sle mentions. I wouldn't look at raw vegas, but what-if on a future date at various prices. You have to contend with drift in a variety of greeks.