|
PureBytes Links
Trading Reference Links
|
Ray Raffurty wrote in response:
"Rather than run ups and high volitility, you should be looking for the
exact
opposit, a flat chart with low volity."
I totally disagree. The time to write straddles and strangles is when
volatility is high and the underlying has undergone a significant
directional move.
If you write negative gamma strategies during periods of low volatility and
while the underlying is ranging you are exposed to the twin risks of
exploding vol + up/down directional move.
Reasons:
1 Volatility reverts to its mean - and often quickly (refer US bonds in
late Oct 97). Even if you dont write the position at maximum implied
volatility then all is not lost as volatility washes out at expiry.
2 Markets trend and range. If a major trend is mature, then the uncovered
writer is more likely to enjoy a subsequent period of ranging
Graham Critchley
Box 330
South Melbourne VIC 3205
AUSTRALIA
Phone 613 9817 1006
E-Mail gcc@xxxxxxxxxxxxxx
|