General Trading Chat

arsh22g

Well-Known Member
Hello, has anyone tried selling delta neutral option legs to profit from passive theta decay? Idea is to not manage the position, but rather build and forget till the market close, and then square-off.
 

travi

Well-Known Member
Hello, has anyone tried selling delta neutral option legs to profit from passive theta decay? Idea is to not manage the position, but rather build and forget till the market close, and then square-off.
Sure, everyday you can see it being done. The catch is, it works best in sideways mkt.
They say it is about 70% of the days.
You need to figure out based on vix, news etc when ur in high probable sideways period.
But blindly believing that you'll get away without the need to manage if need arises then it's a farce.
 

Schatz

Well-Known Member
Hello, has anyone tried selling delta neutral option legs to profit from passive theta decay? Idea is to not manage the position, but rather build and forget till the market close, and then square-off.
life cant be that simple ... its important to understand there r plenty of smart people in the world... if it was so everybody would be doing that .. and in turn it wont exist anymore...

as travi said, if u have to build a system to be selective about days but then there is something called adverse selection ...one day is enough to wipe out many day's profit if u choose not to manage.. however , limited risk strategies with less sensitivity to expiry may achieve a part of that...
 
Had heard (Don't know the truth) that big intraday traders keep .5% SL on NF. So the market on most days finds it difficult to cross that mark. VWAP at 12033 and the high we have made in the recovery is 12084 about 50 points. Generally seen that the range of 50-60 from VWAP offers the blockade.
Today the VWAP is at 12217. So the rally should find the hurdle at 12267-77 range (50-60pts from VWAP)
 

arsh22g

Well-Known Member
Sure, everyday you can see it being done. The catch is, it works best in sideways mkt.
They say it is about 70% of the days.
You need to figure out based on vix, news etc when ur in high probable sideways period.
But blindly believing that you'll get away without the need to manage if need arises then it's a farce.
life cant be that simple ... its important to understand there r plenty of smart people in the world... if it was so everybody would be doing that .. and in turn it wont exist anymore...

as travi said, if u have to build a system to be selective about days but then there is something called adverse selection ...one day is enough to wipe out many day's profit if u choose not to manage.. however , limited risk strategies with less sensitivity to expiry may achieve a part of that...
Thank you for your perspectives. Yes, the system is robust to withstand high movement days, but it is not selecting any particular day based on VIX or other indicators. VIX doesnt lead or lag, so no point in using unless you are arbitraging on theoretical(Black Scholes) vs actual values. Due to lack of options data, I could backtest it just for 6 months.

Have either of you followed options selling, in any shape or form, as a pure strategy?
 

Schatz

Well-Known Member
Thank you for your perspectives. Yes, the system is robust to withstand high movement days, but it is not selecting any particular day based on VIX or other indicators. VIX doesnt lead or lag, so no point in using unless you are arbitraging on theoretical(Black Scholes) vs actual values. Due to lack of options data, I could backtest it just for 6 months.

Have either of you followed options selling, in any shape or form, as a pure strategy?
i sell options on regular basis and i manage it aggressively when called for.. days like today, yesterday ... if u say u would nt manage u r sitting duck on 200+ trend days...
 

arsh22g

Well-Known Member
i sell options on regular basis and i manage it aggressively when called for.. days like today, yesterday ... if u say u would nt manage u r sitting duck on 200+ trend days...
Delta gain > theta decay in about 20%-25% of the trading days. Trend without a substantial intraday movement (exc. gaps) hasnt been a drag till now. Maybe I can increase my lookback period to stress test this.
 

Schatz

Well-Known Member
Delta gain > theta decay in about 20%-25% of the trading days. Trend without a substantial intraday movement (exc. gaps) hasnt been a drag till now. Maybe I can increase my lookback period to stress test this.
delta gain > theta loss is very small percentage.. i would say less than 10% ..
however, delta loss > theta gain is about 30% if u can manage it well ..
gaps r problems specially news driven... last 3 days we have been seeing 100+ gap days and above avg intraday volatility ... i struggled tuesday, lost a bit yesterday , broke even today ... these r part n parcel of life .. there were times i made money every single day of a month ... discipline is the key for option sellers... wait for ur turn .. take small losses on the way ...
 
Even the government is going broke. Reminds me of the scenario in America with government shutdown etc.

Govt may seek another interim dividend from RBI as revenue drops: Report
The fresh call comes just months after the Reserve Bank of India (RBI) approved a 1.76 trillion rupees ($24.8 billion) dividend payment to the federal government

Reuters January 10, 2020 Last Updated at 19:36 IST

India's government plans to push the central bank for a fiscal lifeline in the form of another interim dividend, as it struggles to meet its expenditure commitments amid a steep revenue shortfall, three sources directly aware of the matter said.

The fresh call comes just months after the Reserve Bank of India (RBI) approved a 1.76 trillion rupees ($24.8 billion) dividend payment to the federal government, including 1.48 trillion rupees for the current fiscal year.

The RBI largely earns profits through its trading of currencies and government bonds. Part of these earnings are set aside by the RBI for its operational and contingency needs while the rest is transferred to the government in the form of dividend.
It earned a surplus of 1.23 trillion rupees in its last financial year, which was substantially higher than previous years.

One of the officials said the government wants the RBI to consider its demand for an interim dividend given this financial year has been an "exceptional year," with economic growth projected to fall to an 11-year low of 5%. The current fiscal year runs to March 31.

"We do not want to make an RBI interim dividend a regular thing, but this year can be treated as extraordinary," said the source, adding the government is likely to push for a payout of between 350 billion and 450 billion rupees ($4.9 to $6.3 billion) If agreed, it would mark the third straight year in which the RBI has agreed to give the government an interim dividend.

Spokesmen for the finance ministry and RBI both declined to comment on the matter.

India's Finance Minister Nirmala Sitharaman is expected to present the annual budget for the next fiscal year on Feb. 1, and is widely expected to announce a fiscal stimulus including more spending on infrastructure and tax incentives to boost consumer demand and investments.

Shaktikanta Das, who was appointed RBI governor by Prime Minister Narendra Modi in late 2018 after the resignation of Urjit Patel, has cut the policy repo rate five times by a total of 135 basis points and eased liquidity restrictions to support falling economic growth.

Some RBI officials are still reluctant to pay more funds as it could impact provisions to cover sovereign risks, sources said, but the government is hopeful that the RBI board, which include its nominees, will approve the dividend.

A panel headed by former RBI governor Bimal Jalan was set up by the RBI in 2018 to recommend a formula for the sharing of its profits with government.

The panel, whose suggestions were accepted, approved a record dividend and has said an interim dividend could be paid only "under exceptional circumstances."

"EXCEPTIONAL YEAR"

New Delhi wants the central bank to extend a helping hand as it faces a shortfall of more than one-third in its revenue target of 19.6 trillion rupees ($276.2 billion) following a severe economic slowdown and cut in corporate tax rates last year.

Modi met officials and economists on Thursday, and sought suggestions for the budget and to make India a $5 trillion economy.
The government is worried about an economic slowdown as the manufacturing sector is projected to grow just 2% compared to 6.9% a year ago, hitting tax collections.

RBI officials have been told the revenue shortfall was currently estimated at between 34-37% of the budgeted target, but using all efforts may be brought down to nearly 25%, the first official told Reuters.

"India is facing a serious crisis. We need all steps even to achieve 5.5% to 6% growth next fiscal year."

https://www.business-standard.com/a...i-as-revenue-drops-report-120011001372_1.html
 

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