THREAD ON IRONFLY

These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)

A THREAD

Topic: Why triple straddle has no real benefit.

A triple straddle is essentially an ATM Straddle & one or two step away straddle on either side. The position is almost neutral strategy just like any other neutral straddle or strangle.

1/

We can also view the position as an ATM straddle, a strangle & inverted strangle.

For example

Nifty: 14700

Triple straddle: 14600,14700,14800

Another view:

14700 straddle
14800-14600: strangle
14600-14800: Inverted strangle

2/

So the real question is what is the advantage of an inverted strangle over it's otm counterpart?

The answer is none.

They both have same premiums/theta. Only that slippages will be high in inverted strangle when we do the required adjustments plus liquidity issue.

3/

So isn't it better that instead of a triple straddle, we can just do ATM Straddle & 2* OTM strangle.

So in the above eg. the position will be

14700 ATM straddle
2* 14800-14600 otm strangle.

Same premium received, similar range just that there's no nuisance of ITM options.

4/

The question arises:

Why trade in an ATM straddle & 2* OTM Strangles? Why over-complicate?

Options are in itself a complicated instrument. Wouldn't it be better to stick to one straddle or a strangle & adjust accordingly?

Lesser the strikes, more there will be clarity.

5/

Understanding HIGH & LOW VIX

VIX at 16: If you check today's IV behaviour, they were not spiking much even with decent delta move in BNF. The movement was subtle, giving some time to adjust. So someone having good adjustment mechanism can stay in the game longer.

1/

VIX at 20: The same delta move will be more fierce, coupled with rise in premiums. When premiums rise with movement, then the adjustment cost increases exponentially. The premiums can fall back at EOD, but the damage is done if caught in the spike.

2/

After talking to few traders, their backtest result was in favor of high VIX of 2020, rather than 2017-19. The key flaw in the backtest were the adjustments which are not easy to calculate. Combination of high theta & fixed SL during high VIX, the IV crush is cashed at EOD.

3/

Neutral option sellers who don't adjust & have fixed SL on a static straddle will not be able to benefit highly in low VIX. The straddle which moves away from ATM will increase no matter what. But if we keep on rolling our strikes, then we get good realisation of theta.

4/

I have made majority of my profits in option selling when VIX was at 13-15, mostly just relying on my adjustments. Since 2020 with high VIX, adjustments stopped working because of increase in the frequency of delta + IV spike combos & so had to shift to directional trading.

5/

Q: Sir why call option premiums are higher the put?

A: It usually happens when there is big difference between spot & future.

Example

BN Spot: 35110
BN Future: 35300
BN Synthetic Future: 35150

It depends on our perception of what is ATM & accordingly match the calls & puts.

@RyanKemper10 @ScottAdamsSays @TherealzCRS Meaning to do this anyway. Strap in.

My main concern with masks is their ability to force filter droplet (with a predictable 6 foot arc) into aerosol, which has an 18-20 foot trajectory, remains aloft for gravity. It remains aloft for hours, and doesn’t respond predictably 1/🧵

3 December 2020 #MAGAanalysis #RedoTheElection

When You Catch A Thief

The sleeping giant of America sleeps no more. We have awakened. We're nothing more than the same Common Sense Americans we were in 1776. We're feisty. Independent and self-sufficient. Hard working.

THREAD: My thoughts on the decision not to call witnesses. Please correct me if I'm wrong. This take is based on what I think I know, and there's much I don't know, but I do not understand why the dems didn't depose Rep. Beutler. Let's talk about the objections: 1/

First, many are saying it would drag this thing out and prevent Biden's agenda from moving forward. I don't see how that's possible. The senate had the votes to depose Rep. Beutler. We saw that with the 55-45 vote to allow witnesses. GOP can't filibuster that 2/

It would have taken probably a week to depose her and introduce her testimony into the senate record. The senate is scheduled to be in recess this week. The only thing a deposition of Beutler would have done is stopped the senate's vacation. 3/

Since everything would have been done in roughly a week, and the senate was scheduled for a week-long vacation, the deposition of Beutler wouldn't have delayed any of Biden's agenda. 4/

Next, many are saying Mitch threatened to filibuster Biden's agenda. That's also an empty threat. Cabinet confirmations require only a simple majority vote, and the Covid relief package is going through the budget reconciliation process so it's not subject to filibuster 5/