2 questions @destriero : Help me/us understand the bolded above. Say you short the ATM March19'21 AMZN straddle, AMZN at Fri close is 3275. If we are to understand you correctly, you are saying go buy AMZN March19'21 4000 calls and 2500 puts or something similar? Instead of buying 3875 calls and 2775 puts and flying it off. What's the difference between being long wings and flying it off? At those strikes above, cost of protection is about the same. Are you saying simply have long crash/meltup protection? What if we say flying it off is good enough, I don't need up/down long gamma? A lot of us are executing through IB. Do we need to be building our own pricing model to find out vol lines or are the numbers thru IB/XYZ retail platform sufficient/real?
ofc. The vol was 33 mid. Buy side guy is known. Sell side guy makes market and the result is a conversion for the MMer. Even buy side guy knows where the vol-line is. The difference is the MMer knows what impact the transaction will have on listed vol.
I am not talking about structuring flies. I am talking about contrasting your local vol-book (trading ATM) with hedging the portfolio.
ofc, but I haven't read Taleb. He's so awkward. The intent was to (pardon) dumb everything down and use practical scenarios. We're like a year away from that topic. Like why interpolate OTC penny strikes inside 1SD? I don't think this thread will get deeply into sticky delta/SS. It's good to understand the mechanics of smile, but for most it will be noise, especially as it relates to trading SN (single name) vol.
Nice to see everyone talking Japanese in here. Konichiwa. Directional trader signing in for hopefully some non directional and hedging tips. Offering my early thanks, it's awesome when the internet isn't shit.
A retail's opinion: 1. On high volume like SPY you really don't know but with a bid/ask spread of 1-2 pennies, you don't care. 2. On thinly like GILD with bid/ask a mile wide, ~100% of the time it is MM 3. Unless either the bid/ask has sizes like 1/xxxx. The 1 lot is probably retail trying to buy. 4. If your mid got hit immediately, perhaps another retail took the opposite position at the same time using the same mid. So on my GILD trades, I look at size before I enter my limit.