Vol-trading for beginners

Discussion in 'Journals' started by destriero, Feb 14, 2021.

  1. destriero


    I have some stuff to offer newbs to protect them from themselves. I am not going to f*ck myself and offer anything that I deem proprietary, so if I don't respond to your question then you'll know why.

    If I get more than 10 likes on this post I'll start the journal. I don't want to waste my time if there is zero interest.
    radex78, Tony Stark, Atikon and 81 others like this.
  2. Subscribed to thread.
  3. Overnight


    See, dest is not content with just 10 likes. He wants just that one little extra kick to 11, because this thread will be one louder.

  4. CET


    There will be interest but it may be slow today with the holiday weekend and the awful weather some are experiencing.
  5. destriero


    1) Net liq is your inventory. PNL is your revenue. You wouldn't piss-away every dime you take in at POS as a small retail business; you would plan for the future/reinvest, save for cyclicality/slow months.

    2) Open an account that will NOT be a source of living expenses. You wouldn't take payroll money out of your small business and buy that Rolex, so stop being so fucking undisciplined. Fund the account with what you can feasibly leave untouched for a year.

    3) For those of you with less than $25,000. You will only be trading the close when opening the position. I mean that you will be entering orders to open a position in the last 30 minutes of the trading day. Yes, you will miss some reversals, etc., but you'll be on PDT restriction if you open/close in a single session x three times in a week. I think most brokers will offer a single exception if you fuck up and violate PDT. Some brokers consider each leg of a complex position, even if on a single complex ticket, as a single trade. IOW, one long fly may be considered as three trades. Trade near the close to open a position. You will be forced to carry all positions overnight so keep that in mind. This is no methcathinone daytraderrrrs chat.

    4) You'll trade your gamma small to start and everyone trades half size positions to start. That is the first topic of discussion along with synthetics. You cannot trade half-size without a basic understanding of synthetics. I didn't take you to raise so I am not going to post all the synthetic relationships; we'll start with put-call-share and spread to combo conversions. Beyond that you'll have to ask in PM. If I have blocked you then obv I don't want to hear from you.

    5) No stocks under $100 (with few exceptions). No HTB bullshit. Large, liquid names. Go to finviz.com and use their screener. It's free. Choose "shortable and optionable" on the right drop-down and then sort by price (not mcap). It's a good rough list of available tickers. I am not going to dive into GBM, granularity and microstructure. Trade small size on big tickers.

    6) We're not babysitting here. You are not making markets. You'll trade MARKETABLE. Large caps with liquid vol-markets. If you cannot make money by lifting offers and hitting bids in large caps then you're BSing yourself and you're in the wrong business. I edited this as I was typing as I calc my edge loss off mid (for the year). I don't think you'll believe the figure so I left it out. My point is that you cannot concern yourself with trading at mid or babysitting vol and deluding yourself that you are a market maker--you're taking liquidity with every trade. I cannot help with individual tickers unless I am active in that series, but simply monetize the spread value per lot and assign a figure on edge loss that you're comfortable in taking. Either you will fill or you won't. If you're not filled within ten minutes then your spread is unreasonable. If you're filled after fifteen minutes then spot moved against you and you're wasting your time. Get a job.

    "For the want of an eighth the kingdom was lost."

    "If in doubt; get out."
    Last edited: Feb 14, 2021
    Atikon, ITM_Latino, maler and 11 others like this.
  6. destriero


    7) You're trading vol locally and be a net-buyer of wings. Long or short vol (LOCALLY) you have to be long convexity at the wings. It's always in your favor if you're short gamma locally. a. you're going to be protected on the downside as markets crash (strips rally) and b. protected on the upside by contamination/stickiness on up/out calls, c.long dgamma/dvol. By long wings I am not referring to fly-legs. I am referring to taking a portion of capital (sunk cost) and devoting it to cheap wing protection. Singles (strangles) are preferred, but condors are acceptable. If you're long more than or short more than 100D you can hedge one side. I've numbered these points to reference later.

    Think if it as insurance. Even underwriters insure their outliers (re-insurers).
    Last edited: Feb 14, 2021
    Atikon, ITM_Latino, maler and 8 others like this.
  7. Arnie


    I've been here since very early 2000's and this is the first thread I've ever subscribed to.
    yc47ib and destriero like this.
  8. deltaf0rce


    First time in years I have subscribed to a thread in any type of board. Thanks Dest!
    destriero likes this.
  9. destriero


    Tonight/tomorrow we will begin to discuss synthetics and equity forwards -> risk on structures -> trading "halves"
    yc47ib likes this.
  10. vanilla


    Damn. Thanks a ton for this dest.
    #10     Feb 14, 2021
    destriero likes this.