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How to add -Delta, +Vega for 2nd 1/2 of 2020?

3 replies, 3 voices Last updated by John Locke 1 year ago
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    • #16134

      John Locke
      Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

      I like this whole discussion. I put Steve’s comment into the Pro meeting for discussion


    • #16121

      Steven Ganz
      Points: 442
      Rank: Freshman

      Virginie, I personally have a sizable amount in GLD, GDX, GDXJ and some individual gold miners and have held those positions for 9-12 months now and it has helped.

      I do have a trade I call a BFF (Breakout For Free) in the VIX, but the vix needs to be lower for it to be free, but you can still model it up and check it out.  Basically, when the VIX was in the 12 range and has had a historical low in the 10 range, I would do a ratio spread where I would sell 15-20 $11 puts and use those proceeds to buy 8-12 $13 long calls.  Assuming the VIX holds it’s historical lows and does not fall below them (which has been a good bet pretty much for ever thus far), this trade has cost nothing to put on. At our current VIX levels however, there is certainly downside risk as the VIX “could” drop considerably from where it is now.


    • #16119

      virginie afota
      Points: 985
      Rank: Freshman

      Thanks Steve,

      I am also interested in this topic. Great questions.

      Maybe something to explore as well are other asset classes (like possibly Gold or Treasury) that would benefit from a market sell-off and higher volatility. I have not looked at it yet but they might have more attractive volatility profiles to put trades on.

      VXX or VIX options can also be interesting tools to play that volatility.



    • #16114

      Steven Ganz
      Points: 442
      Rank: Freshman

      John, Stephen and anyone else that has some thoughts on this question – While I know our current markets are doing nothing but going UP, is anyone working at building bearish (-Delta, +Vega) as we head into the fall and election season?  If the fed continues to throw TRILLIONS of dollars at our economy, maybe our markets won’t sag, but at a minimum, I would think IV would elevate going into the election period – AND if Covid continues to ravage and the fed can’t keep up their spending pace, I do think the markets could sag as well – so just trying to develop the least expensive ways possible to prepare for a potential market drop, but a high percent chance of increasing volatility surrounding the election?

      Things I am considering at this point:

      • Bearish Butterfly’s:  But if the market falls too far and too fast, it could blow right through them, AND you are on the wrong side of IV
      • Calendar’s/Diagonal’s: I am looking at things like selling the SPX Oct Monthly 2800’s and buying the Nov Monthly 2850’s
      • BWB’s: with a 60/40 or even 50/30 Bearish Tilt, but they tend to suffer a little much if the market continues it’s run up
      • Long Straddle: I could consider long straddles, but I think it is unlikely that the market would go up enough to ever make the long calls worth anything.
      • And finally, just buying some way out of the money puts while they are a little cheaper at these elevated market prices, but of course Theta will be costly in them

      Thanks for anyone’s insight, thoughts and ideas.

      Please share any thoughts.


      PS: John – maybe this could be a topic for an upcoming Pro’s or Trader session?????


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