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marc'o'polo

marc'o'polo
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  • Selling Puts And Calls: Dessert And Coffee [View article]
    one CON would be that the decay on 6m puts vs. 1y puts for example will be higher so you will have to recover more through the sale of sort dated options and in the case of a big down move the 1y options will have higher vega and will gain more from a potential implied vol spike. But yes the mark-to-market will be less volatile as the 6m put will get to delta 1 quicker than the 1y puts in case of a drop. If you can ignore that with the knowledge it should all square up after a year I would go with the 1y version.
    Aug 26 03:31 PM | Likes Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    I agree the difference between SPY and SDY is not massive, might add up over time though.
    However the payout profiles of the 2 strategies are quite different though. If you have an agressive rally A will most likely result in a loss (long dated Put will be worthless quickly and shortdated ITM put doesn't recover all of that premium) while B will still show profit from the long ETF component.
    On the downside in a big drop they should be similar as A has 12 short dated puts (which will have delta 1 quickly) vs. 12 long dated Puts which is similar to the stock component for 9 Puts equivalent in B (also delta 1) and 3 extra short short-date puts.

    So my conclusion is that on the downside they are probably quite similar (assuming SPY and SDY perform similar, otherwise you can always buy SPY instead to eliminate that risk) but on the upside B should be better especially in agressive bull markets.

    When markets move sideways and/or with low vol then A will be better as it generates more income from the short dated puts.

    A is basically a short gamma trade (with some hedge) that tries to generate income while B tries to be long the market (SPY or SDY) with a 'free' hedge (the sale of the short dated put is mainly supposed to cover the cost of the long dated Puts any income above that is bonus)

    So bit different approach.
    Aug 25 07:45 PM | Likes Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    >PS – In my opinion SA has incurred a major loss on your option articles

    I'd second that. I have been reading many of your articles with great interest and they have been an inspiration even though I had been trading options for quite a few years. I still follow some discussions on these articles like this one...
    Don't know why SA is going backwards when everyone else is embracing derivatives for the endless possibilities they give you.
    Aug 24 07:38 PM | Likes Like |Link to Comment
  • Is VIX Too Low? And Where Do Volatility ETPs Go From Here? [View article]
    @earlpearl
    It's your money so I don't want to lecture you on how to burn it - but have a look at a chart of VXX, TVIX, UVXY etc. if you had averaged down every time they were down 10% you would have lost a lot of money .... you have to be right and the vol spike has to come pretty soon for you to make money - they are not a buy and hold product.
    Having said that I hope you are right and we get some sort of correction and vol spike soon as I'm out of my VXX puts (too early in hindsight) and hesitant to get back in with VIX at 12 despite ~12% monthly roll yield.
    Aug 4 08:38 AM | Likes Like |Link to Comment
  • Trading VXX And XIV Against Each Other: Taking Advantage Of Quasi-Correlated VIX ETNs [View article]
    thanks for clarifying.
    I'm only little less confused now. I know now what the position is that you are suggesting but I don't get why you are short VXX and long XIV - both are positions to be short VIX front months futures. Supposedly its more efficient to play that with long XIV rather than short VXX as there wont be any borrow cost. As the short VXX is in no way a hedge - its basically doubling up on the same position - I don't get the purpose of the short VXX position at all ...
    Feb 27 01:22 PM | Likes Like |Link to Comment
  • Trading VXX And XIV Against Each Other: Taking Advantage Of Quasi-Correlated VIX ETNs [View article]
    yep confused about that too. Can you please clarify the position that you are suggesting? thanks.
    Feb 27 09:39 AM | Likes Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    hey Ken, are you still selling the 102% weekly in this environment? Premiums of 10c and lower hardly seem worth selling just to buy them back at a dollar as market seems to find no stop. Even the monthly put has to be close to atm with IV that low to generate the time value to pay for the yearly Put.
    Jan 25 07:31 AM | 1 Like Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    thanks Ken!
    Jan 21 05:46 AM | Likes Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    Hi RK, I'm 2 months in to this strategy now and quite happy with the results. I'm up 3.75% and while I underperform SPY (up 7.5% in the same time) I'd expect the strategy to catch up as most of the underperformance is due to the long dated put (1 year) dropping almost half of its value after only a couple of months due to rising spot and plunging vol. With pretty much 10 points rally in the SPY and VIX at 5y+ lows I'm looking at rolling my long dated put up to an atm strike again. I wonder how to 'account' for the cost of rolling it up. Would you add this to the money you have to make from monthly ITM put that you sell?
    Say the market drops 10 points after I rolled my hedge up and IV spikes a lot and I feel the market is due a bounce - would it make sense to monetize the gain in the long dated put and again adjust to an atm strike?
    I also wonder whether to add to the position. What do you think is more important for the strategy to work over the course of a year? Timing an entry point where IV is low and the long dated put is cheap? Or - as this is a mildly bullish strategy - further upside potential to the market?
    thanks for your comments,
    Marco.
    Jan 20 02:34 PM | Likes Like |Link to Comment
  • Trading The VIX: A Dummy Making Money [View article]
    as far as I'm concerned with vix settlement (VRO) at 13.69 that would have been cash settled at 0.31$. If you sold it higher you made a profit, if you sold it lower a loss.
    Jan 16 04:39 PM | Likes Like |Link to Comment
  • Trading The VIX: A Dummy Making Money [View article]
    >RK: the settlement value of vix options is based on a special settlement quote using Feb futures. Take a look on Wednesday and you'll see a minor miracle for those that sold puts. <

    I was intrigued by that statement as I didn't understand it and it went against what I (thought I) knew about VIX settlement. I did roll / close my position before settlement as usual but was intrigued where the settlement (VRO) comes in as I never looked at it before.
    Now we have VRO (VIX settlement for Jan options) at 13.69 vs. a VIX spot of 13.55 (Tue close) and ~13.70 (Wed open) and a VIX jan future of 14.20 and a Feb future of 15.80 (both Tue close)
    Could you elaborate on above statement using these numbers? thanks, Marco.
    Jan 16 10:38 AM | Likes Like |Link to Comment
  • Trading The VIX: A Dummy Making Money [View article]
    I never let a VIX option go to settlement so far, so far from being an expert but as far as I'm concerned Jan VIX options will settle on a VIX settlement price (traded SPX option priced on the open on Wed or something?) should however be close to VIX spot and hasn't got much to do with Feb Future? (Not sure if I understood your comment there right) Otherwise with the Feb VIX future at about 16 you wouldn't worry to much about the 15 strike Put (and it wouldn't be worth 1$ with only a couple of days until expiry either)
    My comment wasn't so much about this trade but rather on an issue with selling VIX puts and rolling them in general.
    If term structure is steep like it is now you won't be able to roll at a credit (jan 15 put is ~1$ and will be even higher if VIX spot settles close to 13) the Feb 15 Puts is only about 0.70
    So unlike with options on stocks you lose money rolling them, potentially more than you received in premium when you first sold them.
    Jan 13 11:29 AM | Likes Like |Link to Comment
  • Trading The VIX: A Dummy Making Money [View article]
    if you roll an ITM put to the next month you may not receive a credit though if term structure of futures is very steep (usually when VIX is low) infact you may have to roll for a debit that could be higher than you initial premium. So if VIX drops and stays low for a month or 2 then this strategy is in trouble. Even if you see it as a hedge for your long stock portfolio - VIX may stay low and stock market may just move sidewards.
    Jan 11 12:17 PM | Likes Like |Link to Comment
  • Stop Guessing And Learn The Statistical Way To Invest [View article]
    why is a 0.25$ credit for a 2$ credit spread with a ~15% delta/probability to lose money (taking the delta of the short strike) better than a say 0.50-0.55$ credit for a 2$ spread that has a 30% loss probability or a 1$ credit for a 50/50 chance?
    If you do 100 trades of each in a truly random walk market you should have the same outcome (?)
    Dec 5 01:02 PM | Likes Like |Link to Comment
  • Selling Puts And Calls: Dessert And Coffee [View article]
    Hi Ken,

    doing a little more thinking around this strategy...
    the big risk as you point out is a) a volatile zig zag market but b) also a sharp rally. In that scenario you will see the value of your long dated put decline sharply and you will find yourself a short naked call.
    I know you trade options on SPY for a while now - did you have that strategy on in 2009/2010 and how did you deal with the volatility (especially on the upside - both years had 4 months where SPY was up between 6 and 9%)
    Why do you stick with the strike for the weekly call throughout the month? Rolling it up as market rallies would protect you more against a sharp rise (with the trade off that you lose more should the market drop back mid month but with the long dated put I reckon you are less afraid of the downside (?))
    Nov 14 07:48 PM | Likes Like |Link to Comment
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