psst Wellesley is nice. But I am looking forward to the discussion of his butterfly option trade on VIX futures, which I figure we will see in a year or two
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Huh? There ya go, talkin' waaaay over my head again.
Then again, that is why I read here so often, so I can learn me somethin'.
Don't worry that was the craziest trade I could think of. VIX is a prediction of future market volatility. Essentially, it would be betting on will the market swing radically up and down in the future.
However the actual explanation probably needs at least 1/2 page and there is no chance I could explain it right
. Actually it hurts my brain just trying to figure it out!
I may trade an Iron Condor this week, just to have something to talk about and sound important
Rolling the option up and out, hedging with a Delta-Neutral position, covering the long leg with a Diagonal Spread, delving into a dispersion trade, throw in all those greek terms, delta, gamma, theta, and vega, - who wouldn't be impressed? Actually, those are a bunch of random option terms thrown together, they make no sense (unless it was pure chance). Ahhh, if I tried to pull it off, someone would say "Iron Butterfly! Dude, I love "In-a-gadda-da-vidda" - the long version! Used to listen to that on 8-track in my Vega!".
Actually, I did read most of MacMillan's book on Options shortly after I retired (1001 pages!).
Amazon.com: Options as a Strategic Investment (9780735201972): Lawrence G. McMillan: Books
But 2/3rds way through, I realized all these different options were just mixes and matches that put you on a different part of the curve, set the slope, and/or limited the upside/downside risk. To an electronics guy, it was like adjusting the gain, bias, and the positive and negative rails of an op-amp to match your signal conditions and desired output. Or like that long thread a few years back on 'insane retirement strategies', you can place a bunch of different types of bets on roulette, but in the long run, the payouts are all basically the same.
-ERD50