Tail hedging alpha: If you want to structure almost a win, win tail hedging bet. Look for assets that are exhibiting higher relative momentum and place put ratio trades(short ATM, 2x long tails. in the backend of the curve) (1/n).
90 - 120 dte(seems the sweet spot, manage 30 - 60 days In.)
I have also noticed that equities that exhibit higher relative momentum not only breach the Implied move but often have much flatter put skew(thus causing the tails to be relatively cheaper.)(2/n)
If a black swan happens which causes markets to suffer severely, the correlation for slightly positive/noncorrelated assets goes near 1.) which will likely cause your tail hedge to print money(and more money relatively speaking since skew was cheaper.)(3/n)
If nothing happens, you will probably collect half the credit received since momentum stocks statistically continue trending while trending. But let's say you have terrible luck, since you’re managing the trade you will have relatively a tiny loss.
(4/n)
If you have enjoyed this thread and have benefited please retweet it, so others can benefit as well thanks. If I get a lot of retweets I will possibly share more alpha. Thanks, Swan Fam.
#finance #stocks #options #trading #Investing #hedging
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