VolSwan Profile picture
Mar 1, 2022 5 tweets 2 min read Read on X
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

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with VolSwan

VolSwan Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @VolatilitySwan

Mar 8, 2023
A simple systematic tactical momentum strategy that has done great.(1/n)
Read 8 tweets
Mar 8, 2023
Methods to managing negative convexity/tail risk while shorting vol via options.
1) Buy convexity, the most obvious thing to do but most effective. Managing a book full of uncapped negative convexity exposure Is a hassle and negative EV(if you think about the all the possible outcomes occurring.)
Sometimes convexity is cheap in different tenors or even correlated products, but buying convexity in different tenors/products present different type of exposures(don’t look into doing this if you aren’t really advanced/know what you’re doing.)
Read 6 tweets
Jun 19, 2022
How to build a successful VRP harvesting strategy (1/n)
First, you MUST identify vol regimes. Which ones pay the most/least relative to the risk you inventory (2/n)
Find a way to forecast realized volatility(HARQ/An average of all GARCH vol models.) (3/n.)
Read 11 tweets
May 4, 2022
How to know If your strategy has an EDGE 👇 (1/n) Image
First and most importantly, your strategy MUST and I mean MUST produce positive expectancy. If you don't have positively expectancy, you will lose money in the long run(law of large numbers.) No amount of discipline will overcome negative expectancy. (2/n)
Expectancy Is essentially your probability-weighted average. To calculate expectancy In a quick and dirty way, you need to calculate your win % * avg win amount subtracted by loss % * avg loss, trading end of day Is a game of numbers. (3/n)
Read 9 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(