Traders,
The market has done nothing over the last 3 days....if you look at close-close. However, looking at intra-day volatility, the market is still running around.
Compare=current SPX ATM implied volatility is about 23%. This prices a one day standard deviation of about 13.25 points. This would be difficult to manage if a trader was only hedging at the end of the day. However, traders that own premium and plan to trade gamma should be sitting in front of a computer. In 6 of the last ten trading days, the market has moved about a standard deviation or more. Traders that have been scalping gamma should actually be making money. Thus, I don't hate being long premium, although I would want to make sure I was short vega, both raw and weighted.
What is the best way to do this? I kind of like getting short time spreads. I think August is too cheap, in relative terms, and September is too expensive (this also has to do with why I don’t like butterflies believe it or not).
Looking at the major indexes, the one I like selling is OEX, the one I like buying is either the RUT or the NDX. I am neutral the SPX, although I would lean toward selling it.
On a quick note, did you guys see the call I made this morning on BP for SFO Magazine? If not read it here: SFO Magazine
The Option Pit site launch has been an enormous success; I cannot thank you traders enough for your support. Expect the morning (free) and noon (not free) Pit Reports to start next week. If you haven’t taken the time to check out the site, please do. If you have any questions, give me a call 888-Trade01.
