The retrospective self cringe is so on-point: Heres one: In the 90’s I taught English in China for 2 years and prided myself on learning the language well and living and traveling with the locals. I was deep in Sichaun province when a horse-drawn cart driver told me while disembarking the price was 2 yuan (25 cents). I had previously inquired about the going price from bystanders before getting on board, which was 1 yuan for the 20 minute ride. When I heard he was double-charging me I blew up in a tirade of indignant Mandarin, describing how my ass was the same size as a Chinese person’s ass, and therefore the price should be the same. I told him his mother would be ashamed at his behavior and self-righteously threw the 1 yuan in his direction and stormed off. I was so proud at the time. Sigh.
So embarrassing.
Glad we can learn from each other and folks like you sharing their wisdom. Great post.
“ If a widow getting paid is deemed a self-congratulatory act of corporate benevolence then Warren Buffett is the priest of puts, a hokey paragon of virtue, backstopping markets with the heart of a patriot. Ok. “ - 😂😂😂💯
Appreciate the critical view of QYLD, which seems to have many evangelists these days. Given that QYLD has a worse CAGR, Sharpe ratio, and risk-adjusted return over time than QQQ, is a plausible strategy* to take the opposite strategy and buy the monthly ATM calls? QYLD has a lower volatility than QQQ, so clearly (and intuitively) this would be higher vol, but perhaps that could be balanced with a cash reserve via Kelly Criterion. Too lazy to pull out the spreadsheets and prove it...
*For retail investor, not an actual market maker. I'm sure the math is even more favorable cutting out the price spread. When does QYLD schedule their writes...?
- aren't leveraged investors natural buyers for the call? I understand there is still the issue of demand/offer (how many leveraged players there are vs investors in QYLD), but does someone interested in buying the option exist...no?
- options MM compete for QYLD 'order flow': doesn't this competition makes sure that yes, QYLD loses some money, but that loss is not that big?
To address 1...someone is interested in buying the call but the analysis is "on balance" it's for sale
For 2....the mm's compete but their collective bid will not exceed a price needs to clear those greeks. The highest bid for the risk (once the supply curve of natural vol buyers is satisfied) will come from the mm whose most efficient at laying it off somewhere else.. So the bid is contingent and the QYLD will have impact as long as some other party didn't wake up that morning saying i want to buy exactly what they are selling because they actually want to own the risk
This was fantastic. Thank you.
The retrospective self cringe is so on-point: Heres one: In the 90’s I taught English in China for 2 years and prided myself on learning the language well and living and traveling with the locals. I was deep in Sichaun province when a horse-drawn cart driver told me while disembarking the price was 2 yuan (25 cents). I had previously inquired about the going price from bystanders before getting on board, which was 1 yuan for the 20 minute ride. When I heard he was double-charging me I blew up in a tirade of indignant Mandarin, describing how my ass was the same size as a Chinese person’s ass, and therefore the price should be the same. I told him his mother would be ashamed at his behavior and self-righteously threw the 1 yuan in his direction and stormed off. I was so proud at the time. Sigh.
So embarrassing.
Glad we can learn from each other and folks like you sharing their wisdom. Great post.
Your posts are awesome and highly relevant to me as an ES put writer. I’m way too cheap to do a meeting with you, but keep writing please!
“ If a widow getting paid is deemed a self-congratulatory act of corporate benevolence then Warren Buffett is the priest of puts, a hokey paragon of virtue, backstopping markets with the heart of a patriot. Ok. “ - 😂😂😂💯
Appreciate the critical view of QYLD, which seems to have many evangelists these days. Given that QYLD has a worse CAGR, Sharpe ratio, and risk-adjusted return over time than QQQ, is a plausible strategy* to take the opposite strategy and buy the monthly ATM calls? QYLD has a lower volatility than QQQ, so clearly (and intuitively) this would be higher vol, but perhaps that could be balanced with a cash reserve via Kelly Criterion. Too lazy to pull out the spreadsheets and prove it...
*For retail investor, not an actual market maker. I'm sure the math is even more favorable cutting out the price spread. When does QYLD schedule their writes...?
Just short it and you are synthetically long an ATM put
two prob very silly questions:
- aren't leveraged investors natural buyers for the call? I understand there is still the issue of demand/offer (how many leveraged players there are vs investors in QYLD), but does someone interested in buying the option exist...no?
- options MM compete for QYLD 'order flow': doesn't this competition makes sure that yes, QYLD loses some money, but that loss is not that big?
To address 1...someone is interested in buying the call but the analysis is "on balance" it's for sale
For 2....the mm's compete but their collective bid will not exceed a price needs to clear those greeks. The highest bid for the risk (once the supply curve of natural vol buyers is satisfied) will come from the mm whose most efficient at laying it off somewhere else.. So the bid is contingent and the QYLD will have impact as long as some other party didn't wake up that morning saying i want to buy exactly what they are selling because they actually want to own the risk