They may not factor it in directly in the model, but it does emulate it via the drop in IV from otm to itm.
Tsk Tsk,this is what happens when you don't manage risk.. With that said,do you want to sell cheap "wings" in Mara?? Get off Ralph Elliot Nelson's weiner and learn how to trade A mind is a terrible thing to waste
Please f-off with the Bollinger sht. You cannot arb a vol-line. Fixed strike vol at 40 and what/where are you buying? You're suggesting shorting vol naked. The point is that it cannot be arbed. Structurally there is more juice in upside spreads (cs as revenue side) especially when vols and skews are high (typically one or the other), but you're not making anything from spreading a long (delta) OTM cs/ps RR. Do it! Short VX futures on BB-signals. edit: Short VX, short ES. yeah, I've gone soft.
All I'm saying is the skew makes an itm option cheaper relative to its price otm....which emulates an option becoming cheaper after an expected move...in other words trend reversal probability is factored into options prices indirectly. However, it does not account for the sudden IV crush that typically occurs at a trend reversal. This flaw imo in the pricing model is the only edge that exists in options trading. I believe your arb trading exploits this flaw but is limited by directional prowess...hmmm maybe your group could use some EW members or member to help out???
You keep editing. I am done after this bc you're false. No. An SPX ITM call shares a strike with a +skew OTM put therefore both are skewed. That parity thing. If the call is "cheap" (relative to same strike put) then you buy the call, short the put and short futures (reverse-conversion arb). IOW same-strike vols are =. You must get off on knowing absolutely nothing. And WRT my motivation for anyone asking. I am not really answering wxyz but trying to help with basic stuff for others reading this later (god knows who that would be). I am a better D1 trader than vol(trader). Don't go there.
I'm not referring to indexes or to parity. These are all machinations based on a flawed premise. I am talking about options being most expensive when they should technically be least expensive based on the probability of a reversal/IV crush after an expected move. If you are buying home insurance at the end of flood season, you would expect to pay less than in the middle of flood season. Buying a call when IV is high, is like paying top premium for flood insurance right before a drought. That sounds like a lot of work just to avoid being directionally biased.
God dam,WXY,you are good.This shit is so over the top I took you off Snooze.. What type of sticky skew guy are you? ( p.s.,you should know the difference..hint hint) Why don't you load up on call spreads,collect the skew edge,delta hedge it or Prechter it and take out the vig?? Or stick to what you clearly don't know,trading direction..If you had any D1 ability,you wouldn't be selling cheap puts..
Who trades the vix? Why does options discussion always come down to the vix or indexes that move like mollasses? The only money to be made in options is high volatility stocks 0-5 dte. Any farther out and it's like watching an entire basketball game when you might as well just watch the last few minutes since that's when it's going to be decided.
OP might be a monkey, but the question actually isn´t so bad when you relate it to skew. When you buy a vega neutral 10delta butterfly (aka. you´re buying max volga) you will pay a lot of kurtosis (wings are expensive compared to ATM) as higher vol is anticipated and vice versa. If you find a vega neutral 10d fly for tiny theta/gamma when IV and RV are rock bottom, you basically have a risk free trade