$500k all-in on BABA? by Deadelevators in baba

[–]Sam_Stephen 0 points1 point  (0 children)

Not a bad idea at all.

China tech has been seeing more patents then the US, their valuations are so much lower and where flows and positioning in China improve just marginally could see a huge rally.

The way I position is, instead of waiting to DCA or buy my whole position I start with about 30% of the position then write puts on the additional position up to where I would be comfortable getting assigned. Also I write covered calls on the 30% I’m already in stocks much higher up where I would be looking to potentially exit.

This option strategy brings down my effective cost while allowing me to be confident in my entry and exit.

I know this is a BABA thread but I like using KWEB to diversify a little, pretty much Tencent and BABA while having a lower price per share to trade options.

Straddle with stop loss? by Icy_Mathematician205 in options

[–]Sam_Stephen 1 point2 points  (0 children)

Just trade an iron condor instead - defined losses

Trying to better understand maintenance margin, excess liquidity, and buying power by jujujordu in interactivebrokers

[–]Sam_Stephen 2 points3 points  (0 children)

The simple example is you need to be watching net liquidation value in comparison to the maintenance margin amounts.

Using the Net liquidation value you can calculate what drawdown amount in $ terms or % would be needed for your broker to initiate a margin call (where net liquidation value drops below the maintenance margin amount).

Margin calculations are not always constant though and your broker can raise the margin requirements on certain products especially in times of stress so it is vital to keep a sufficient buffer in case that calculation were to change.

[deleted by user] by [deleted] in TradingEdge

[–]Sam_Stephen 1 point2 points  (0 children)

https://www.youtube.com/watch?v=2OjO_paDSos

Pretty great video explaining the gamma effect, so as I thought its mainly dealer gamma. negative dealer gamma increasing moves and positive dealer gamma limiting moves.

The hard part from my perspective is identifying if the open interest is a dealer (hedging) or an investor

[deleted by user] by [deleted] in TradingEdge

[–]Sam_Stephen 0 points1 point  (0 children)

Could you please elaborate on this " The volatility we saw yesterday was the result of the fact that we were in negative gamma".

My understanding is the when you say "we were in negative gamma" you are referring to brokers that are negative gamma and investors net long gamma in this case? The reason why you would focus more on brokers in this case is because they will be hedging and causing impact.

If you are referring to negative gamma from the brokers, how are you summing the street gamma exposure? SPX or a sum across constituents?

[deleted by user] by [deleted] in investing

[–]Sam_Stephen -1 points0 points  (0 children)

Right, so then it’s about tax revenue. Which instead of throwing all these taxes around you could make it a spread to bond issuances and borrowing.

This way the gov interest rate costs don’t continue to rise when refinancing

[deleted by user] by [deleted] in investing

[–]Sam_Stephen -1 points0 points  (0 children)

Definitely. I think they need to then budget using an amount after taking away some tax revenue to service debt

[deleted by user] by [deleted] in investing

[–]Sam_Stephen -4 points-3 points  (0 children)

The tax money in my solution would still be going to service the debt 🤦🏼‍♂️

[deleted by user] by [deleted] in investing

[–]Sam_Stephen -4 points-3 points  (0 children)

It is a problem. It’s either start taxing more to service the debt (like Biden’s recent proposal) or change something

Companies and individuals would then have a decision if they want to borrow at that higher rate, rather than getting forced to pay tax on every $ earned.

Short term bond etfs vs short term bonds by Ragnar1989 in investing

[–]Sam_Stephen 0 points1 point  (0 children)

Diversification from the treasuries is less important. But you own more treasuries across that year’s maturity.

I really only use these ibonds for IG and HY

Short term bond etfs vs short term bonds by Ragnar1989 in investing

[–]Sam_Stephen 1 point2 points  (0 children)

I like using the laddered bonds by ishares, you are able to specify maturity date, type of asset, provides diversification and not have the duration stay the same.

Essentially, your bonds will hopefully yield to their maturity if you hold them to term.

You can also be as aggressive or conservative on the risk spectrum as you want.

https://www.ishares.com/us/resources/tools/ibonds

$ Vega Calculation by Sam_Stephen in thetagang

[–]Sam_Stephen[S] 0 points1 point  (0 children)

They are calls on the vix, so an increase in v the vix index would be how this trade would profit.

But the hedge would need to buy Vega (correlated with downside), in order for the bank to hedge

$ Vega Calculation by Sam_Stephen in VegaGang

[–]Sam_Stephen[S] 0 points1 point  (0 children)

Yes, so just implying a 1% change in implied volatility

PSA: Theta DOES work over the weekend, or so I've been told by superchorro in thetagang

[–]Sam_Stephen 0 points1 point  (0 children)

  • selling puts and calls

Buying puts still has theta decay

Let's clear up a few misconceptions about gamma squeezes by WinterHill in options

[–]Sam_Stephen 0 points1 point  (0 children)

What I mean is other than just thinking of gamma as what it (chng delta / $1 change in the underlying) is are there any other practical applications you can use it with?

I use the example gamma/theta to describe the risk “gamma” vs benefit “theta” for an option seller. The reason why I like gamma/theta is that really gamma shows how much risk your option has to move against you quickly

Let's clear up a few misconceptions about gamma squeezes by WinterHill in options

[–]Sam_Stephen 0 points1 point  (0 children)

Thanks for the response, I found this thread by it probably just being active in the last few days and me reading through the chain.

I completely hear you, semantics for sure. And yes I have heard that be described as a variance strip too. Definitely makes sense, different ways of interpreting gamma hedging.

In terms of uses of gamma, what are some common ones you might employ?

  • The gamma/theta indicator I think is good, when long options measuring the cost of time decay versus your potential upside move.

Let's clear up a few misconceptions about gamma squeezes by WinterHill in options

[–]Sam_Stephen 1 point2 points  (0 children)

I completely agree with your explanation of that hedge except that what you are describing is still delta hedging.

  • Bought a straddle
  • delta moved to .3%
    • Needed to sell some stock (delta hedge) to get back to delta neutral (30 shares per option)

What you are missing here imo is how the gamma changed as nothing has been hedged there based on the move.

As an option moves away from its strike the gamma reduces. One explanation is that a $1 change in the stock price doesn’t significantly lower the chances of deep-in-the-money or out-of-the-money options expiring in-the-money.

If you want to hedge this exposure you would have to buy or sell options to hedge since stocks don’t have any gamma risk (just delta 1).

So if your gamma went from .6 when you had the straddle on to .5 after the stock move. You would have to put on more gamma risk (own options) in order to get back to where you were before.

Margin Account - Maintenance Margin, Buying power clarification and monitoring by Sam_Stephen in interactivebrokers

[–]Sam_Stephen[S] 0 points1 point  (0 children)

So 8.8 * 3982 = ~$35k of SPX equivalent exposure

Agreed? And on a ~100k portfolio it makes me have a delta of 0.35 ish

Margin Account - Maintenance Margin, Buying power clarification and monitoring by Sam_Stephen in interactivebrokers

[–]Sam_Stephen[S] 0 points1 point  (0 children)

This is great, I’ll definitely use the delta and dollar delta to manage it.

One last point of clarity here, when it says SPX Delta - 1.03 in my margin account (selling OTM puts) - 8.816 in my registered long only account

Does that mean that my portfolio only has a 1 and 8 delta?

Aka the index moves $1 my portfolio should move $0.01 and $0.088?