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I understood that 50cents (the guy buying VIX DOTM calls for 50cents) bet more on an increase in IV than price. A small increase in IV would greatly impact the tails of the distribution. He's trading the implied volatility of implied volatility (VIX).

However Vega is greater ATM.



Not sure but Vega is about 1 (it's dynamic & nonlinear) and IV would needs to 1.5x for the option to double in value (everything else being equal (which isn't true)).

 

I'm guessing everyone's heard this one:

Two economists are walking in a forest when they Come across a pile of shit.

The first economist says to the other "Ill pay you $100 to eat that pile of shit." The second economist takes the $100 and eats the pile of shit.

They continue walking until they come across a second pile of shit. The second economist turns to the first and says "l pay you $100 to eat that pile of shit." The first economist takes the $100 and eats a pile of shit.

Walking a little more, the first economist looks at the second and says, "You know, I gave you $100 to eat shit, then you gave me back the same $100 to eat shit. can't help but feel like we both just ate shit for nothing." "That's not true", responded the second economist. "We increased the GDP by $200!"

 

China's Pony AI Robotaxi Revenue Jumps 200%, Eyes 1,000-Vehicle Fleet...

will this make Sekiyo some extra moola?

 

Just hold on loosely
But don't let go
If you cling too tightly
You're gonna lose control

 

It's not looking good Sekiyo

 

That's okay, still have 7 days to go.

 

Go Sekiyo, go!

 

Okay, so after extra push ups I came back with some clarity.

Things that do not work;

• Put Spreads - Because the risk / reward is bad and I can't wait for it to increase by price going closer.
• Diagonals - cuts the profit from both sides, basically Condor.
• Event contracts - I don't see them any better than Put Spreads, as R:R is pretty close. Can't take any trades that's 20 points away (SPX).
• 1DTE / 2DTE don't work as they don't expire at the end of the day, don't see much of a difference if I just BUY Call or Put.

Stuff that might work, but I don't want to use it;

• Collar

So how that would look like.

1. NY session opened, price triggered the trade underlying being 5000.
2. I sold 5050 naked CALL.
3. Price is going against me (My hedge trigger is the Premium collect - fees) and hedge is triggered somewhere around 5025 and I BUY 5000 PUT + opening required amount of LONG position or buying the underlying.

• If the price is going to stay below 5025 result would be Call +1, Put -1, LONG +1 = +1 (Downside capped, but if the price stays below the hedge price I get 1R, upside is also caped as it was with naked option)

• If the price is going to go above 5025 result would be Call -2, Put +1, LONG -1 = -2 (-2 because this position until the hedge kicked had -1R and 1R for me is Premium received from selling naked option. Also the LONG went into the negative and that's another -1)

So, ultimately it is 1:2 R/R. Would be enough for me, but there is naked option sold. That's a risk. I would code the algo and automate whole hedging process, but we know the markets, sudden spikes etc. Machine could not work properly and there is quite a sum required for the margin and so on.

This is the only working solution I have grasped so far, but it still caries a huge risk that I want to avoid. Correct me if I missing something, it's quite complex thing.

Maybe that I explained more in detail about the specifics anyone came with idea?

Cheers

 

0DTE Earns 3X risk, down. Index.



Earn 4-5X risk up, index (SPX in both). Both are 0DTE.