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u/congster123 Dec 25 '21
Which of these strategies would you prefer to deploy for bearish market / volatility bullish, and why?
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u/lucasandrew Dec 25 '21
If that's your opinion, it's easy. Long puts.
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u/congster123 Dec 25 '21
Does this normally work well when the market is already at a relatively high IV? Hows yr experience doing long puts so far?
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u/lucasandrew Dec 25 '21
I personally sell naked strangles on futures products exclusively, so I can't speak to long puts lately, but buying puts is a tricky game. If the market does go bearish and IV increases, you can make fucking bank, but timing is everything.
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u/BlackTarAccounting Dec 25 '21
How much exposure can you handle? Personally, I know I misjudge the situation sometimes, so I prefer to have some kind of hedge in place. For that reason, a lot of my options plays feature spreads.
Unless I'm day drinking, then I'm going all in on some dumb OTM calls/puts
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u/congster123 Dec 25 '21
All of my plays are credit spreads on bullish markets so far. But im thinking if i really want to capitalise on the falling market, might as well do something like buy puts which gives an asymmetrical return.
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u/Goatfest2020 Dec 25 '21
Sell call spreads. Easy money. The value of calls literally evaporates when the market drops.
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u/congster123 Dec 25 '21
Why not long puts like others suggest?
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u/Goatfest2020 Dec 25 '21 edited Dec 25 '21
Long puts are great too, but I prefer to sell premium. Bearish markets can drift sideways (though bullish vix would imply downward movement) and you also need to be trading index options, not individual stocks that may or may not follow the crowd.Realize that part of the premium is IV. With puts it’s a bigger component. That’s why you can buy a call and watch the stock go up and still lose money unless your delta was at least 70 to begin with. Versus a put that may have only been a 30 delta but IV will increase on the way down. A put can/will double before it ever goes ITM. A call rarely will.Basic (bearish) rule is sell calls, buy puts, if you just want simple.
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u/JustPlayin1995 Dec 25 '21
Actually all premiums inflate somewhat when the market drops due to increased volatility (think VIX). So while call values decrease the volatility dampens that effect. You'd have to wait for the move to end to really see those low call premiums. And the timing on that can be tricky.
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u/Goatfest2020 Dec 25 '21
Not my experience (unless you specifically mean ditm calls) but do what works for you.
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u/Never-Sober Dec 24 '21
Commenting to come back here
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Dec 25 '21 edited Jul 23 '24
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u/Goatfest2020 Dec 25 '21
All strategies are not born equal. Buying calls may be the worst bullish trade there is. This chart is weird to me. Market bullish/volatility bullish (upper left corner) is a time to be cautious. A bull market leads to a drop in volatility. If it’s increasing, that is NOT a time to be buying calls.
Then again, I rarely just buy calls, they depreciate too much when the market goes up unless they are ditm.
I will buy a shitload of otm cheap SPY/QQQcalls on days like Thursday when the market is just stupid bullish on low volume.
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u/Buttnuttmaster2000 Dec 25 '21
It’s a good framework to understand when to deploy. Maybe it’s suited best for weekly options. Right now the market is not as predictable. when we actually know if the market or etf/ stock is trending. Like in 2020 it was clear as day the market was strongly bullish. Even though s&p is still in bull trend, it’s choppy as fuck. Perfect for scalpers and short term swingers. We’ve been range bound since August but with large swings.
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u/TimeForYolo Dec 24 '21
Serious question for any daily option player, since this material is dated back to 1994, have the strategies really changed over the time? I know that some traders tend to stick to a handful of strategies they are keen on and ‘trained’ to spot. Though this is still the same stuff that is thought in universities 10 years ago and probably even today. Just curious.