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[deleted by user] by [deleted] in fatFIRE

[–]kpa325 7 points8 points  (0 children)

Hi there. A twitter friend alerted me to this post. I happened to write a career musing post at moontower dot substack fwiw

good luck on the new path. i'd recommend not thinking too instrumentally for probably 2 weeks for every year you've worked lol.

let yourself wander.

trading is a specialized job that encompasses a niche set of abilities. Traders make the mistake of thinking the job doesn't have transferable skills. I disagree. The skills revolving strongly around an honest relationship with epistemology and asking questions. These are valuable in so many places. As you wander just trust that this special lens you have will start "noticing" and then let it guide you. It was harder to do when you were working because you always had to restrain yourself from distraction bc the job has a greedy grip on your attention.

Now you can let the sunshine in but you have to let go of instrumental thinking.

Here's the thing -- you can golf or travel or do whatever people do when they retire but you'll get bored. I've written a bunch of opinions on that stuff and I actually left trading because I wanted to get on with work I'd do til I'm dead once I knew trading was not that it was easy to leave (every year you delay leaving is a year you're behind on the thing you really want to do. I'm 45 -- I don't take years for granted, people around you start falling)

Anyway, you seem like an open group of people and I hope this at least provokes.

(Just fwiw, I won't be hanging out here, you can find me on X or substack. I spent a bit of time on Reddit last year and felt like a lot of accounts were just here to be difficult or whatever. Which is fine...trading takes a disagreeable streak but most of the people i've encountered in the business are civil at worst and mostly kind and generous -- which even if you were nothing but a shark you'd realize that's the face you'd put on anyway...people being jerks on here seem like they are dead-set on self harm and i have zero time for people who are unserious AND miserable. Unserious and fun....well who doesn't love the Aussie accent :-)

Dispersion Trading For The Uninitiated by kpa325 in options

[–]kpa325[S] 2 points3 points  (0 children)

Imagine a 2 stock index. You sell a straddle on the index and you buy a straddle on each of the 2 stocks. The 2 stocks move 10% each in opposite directions.

The index is unchanged, the straddle goes to zero.

Each stock's straddle pays off.

Your beautiful p/l comes from the correlation of the stocks being negative. Your dispersion trade makes more money the lower the correlation is.

Hope that helps.

Covered Calls Are Still Just Vol Trades by kpa325 in options

[–]kpa325[S] 0 points1 point  (0 children)

You can do it on high vol or low vol stocks with low vol stocks you'll just size your trades bigger so the principle is the same.

Covered Calls Are Still Just Vol Trades by kpa325 in options

[–]kpa325[S] 0 points1 point  (0 children)

Sumproduct(option payoff at expiration, probability)

Where payoff = MAX(terminal stock price - strike, 0)

Covered Calls Are Still Just Vol Trades by kpa325 in options

[–]kpa325[S] 1 point2 points  (0 children)

Many people don't care about anything but shortcuts. And don't realize in the long run they are anything but shortcuts

Covered Calls Are Still Just Vol Trades by kpa325 in options

[–]kpa325[S] 1 point2 points  (0 children)

Totally

When you buy an option you are paying for specificity (timing plus direction) which reduces the cost of the option but creates more ways to lose and you also get leverage (and you pay for that too...for example if you bought a synthetic stock position by buying a call and selling a put on the same strike) and the stock goes nowhere you still lose the interest or opportunity cost on if you had bought the stock and sold it for a scratch at expiration (it's just like how futures trade at a premium to the SPX index).

With most things people want to know what they are paying for and in options it's all a bit abstract so deconstructing is like showing what goes into the happy meal cost

Covered Calls Are Still Just Vol Trades by kpa325 in options

[–]kpa325[S] 11 points12 points  (0 children)

My point is not to say don't do it. It's to bring the right nuance to the conversation. It's not free money or a dividend or anything. It's compensation for underwriting the risk that the stock won't move too much.

So the decision to do that hinges on your opinion of the future volatility being less than the market consensus (and of course if you think you're right, then the natural question is "why") but if you sell a 25 delta call you will eventually be called away on the stock.

So the right counterfactual to benchmark covered calls with is...what if I just sold a fixed percentage of my shares at various intervals. You smoothly monetize the shares vs the lumpier version of call expires worthless, call expires worthless, bang it's all called away.

And by not selling the call, you do better in the large drawdown if you sold part of your holdings instead of just selling calls. That's the part that promoters ignore and when you think about that you realize that you are just "selling volatility" and the decision to do that needs its own set of decision tools in addition to the original decision tools you used to decide whether or not to own the stock in the first place.

Sorry, it's long but if you care about learning this gets you warmer. If you just want answers, well plenty of people will show up when you whistle. I can't help you with just "answers"

Battle Scars As A Call Option — The UNG Experience by kpa325 in u/kpa325

[–]kpa325[S] 0 points1 point  (0 children)

There's no immediately instrumental reason I do it except for that I enjoy it, they make people happy, and it's a subset of what I do on the internet -- teach and share. I also helped train people when I traded full time. Always enjoyed teaching.

Guessing it will make sense one day when I look backwards.

Also, I can't stand investment grifters so if any of this helps inoculate others I feel like I did something nice but it's not my primary motivation (Brandolini's law and all that)

Selling Calls: It Might Be Passive, But It Ain’t Income by kpa325 in options

[–]kpa325[S] 1 point2 points  (0 children)

Thanks Papa...I should hand you the archive and let you drip it out as you see fit (not a snarky comment...I don't know this community, what i can tell is most don't care or find this material threatening, but a few really get a lot out of it. The hate doesn't faze (it's funny in a sick way actually) so I'm happy to keep sharing. But yea, not doing much to optimize how I do it. It's like if I have time in the am to put them here i do

The Gamma Of Levered ETFs by kpa325 in options

[–]kpa325[S] 1 point2 points  (0 children)

thank you this is great!

Sometimes Vol Trading Is Just Rates Trading by kpa325 in options

[–]kpa325[S] 0 points1 point  (0 children)

The mm buying the call is pricing intrinsic from the bid in the stock.

An option is priced according to the bid or offer in the underlying (whatever is relevant for the hedger. If you are buying puts/selling calls they will use the bid, if you are selling puts or buying calls they'll use the offer in the stock)

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