Thursday, May 20, 2010

Re: [TheOptionClub.com] GS TRADE [was:How do you manage your Vega?]

 

On Thu, 20 May 2010 18:46:35 -0500, "mcatolico"
<mcatolico@mindspring.com>u wrote:

>
>
>-----Original Message-----
>From: Ricky
>>
>Simple framework for your kind of trading? Pleeeaze. Just knowing
>the bare essentials is not enough. I am curious why I have never read
>about the method. Do you know many people who operate in a similiar
>way?
>
>mc- of course many people trade this way. It's called delta neutral trading.

It certainly doesn't look like the kind of trading where one keeps
buying and selling shares of stock in order to keep the position delta
neutral. How often during the GS trade was the delta of the position
equal to zero at the money?

>The variation - which is also very common - is that I add outside units as
>insurance bets against volatile moves. It's not particularly complicated:
>"sell local, buy remote" as I've said many times before.
>
The only kind of continual adjustment trading I have seen seen
described in a book is the dynamic hedging with stock kind I just
mentioned. Maybe you should write a book, Michael. Does anybody else
in this forum trade this way?

>If I were to try it myself, certainly paper money for the first
>few months, I would sell a small amount of ATM premium every day using
>the same play each time, perhaps a single IC or IB and do the
>necessary flattening and buying the now OTM shorts during expiration
>week. Have you tried or considered such a semi-mechanical approach?
>
>mc- no and I wouldn't necessarily recommend it unless you have infinite
>funds available. what you are suggesting is essentially a monte carlo
>approach - which works in theory as long as markets are frictionless (not)
>and you have unlimited capital (check no again even if you are warren
>buffett).
>
Uggh. That means I understood what you were doing even less that I
realized. I thought you were selling premium daily, but in a much
more irregular way, often making directionaL bets while doing it. .

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