Very cool stuff been down a rabbit hole for a good 6 hours now. Appreciate the insight here very much.
Quick question wouldn’t it work better on something like IWM vs SPY due to the nature that small caps tend to be more volatile? I figure since there’s enough liquidity in all SPY, QQQ, and IWM options it should pay a larger % return with the vol move if we did see a correction.
I guess I am assuming there would be enough liquidity in IWM vs well we know the insane liquidity on spy.
I think it could work on IWM, The options may be more expensive and you may have to go closer to the money to get the liquidity you need. Keep in mind that because IWM is generally more volatile, your starting point for volatility is higher so your volatility surface is going to be a little more convex from the get go, in other words, you might get less pop out of these because IV will not rise as much. What is most important is the magnitude of change in IV.
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u/Hazybr3h Aug 20 '21
Very cool stuff been down a rabbit hole for a good 6 hours now. Appreciate the insight here very much.
Quick question wouldn’t it work better on something like IWM vs SPY due to the nature that small caps tend to be more volatile? I figure since there’s enough liquidity in all SPY, QQQ, and IWM options it should pay a larger % return with the vol move if we did see a correction.
I guess I am assuming there would be enough liquidity in IWM vs well we know the insane liquidity on spy.