Wow, I had no idea there was a 70+ page thread dedicated to options..

I'm not gonna lie, it was when I first went over to options and got consistently short gamma that I started reaping some serious profits. I never really made it in daytrading, and honestly the ES is one of the most efficient markets out there so I didn't expect to either. All academia consistently finds ES to be efficient especially on a minute basis, same for other daytrading instruments, although there is some weak (very weak) evidence of trending behavior at times. But it's well documented in academic literature that being short risk premium has massive profit potentials and often at S&P beating returns, re. the CBOE put-writing index, studies on vol arbitrage etc. etc. One of my fav instruments is the VXX (which is going through yet another reverse:split, in fact if one was to account for all reverse splits through history, it would start at 6000 or so in 2004 (model)), although I personally go straight to VIX futures or ES future options (one of my fav trades is from Atticus on elitetrader, basically a vol "box" ATM/OTM swap, making "skew" premium, see: Forums - trading option pitchforks

But ever since the dawn of vola ETFs/ETNs, the short premium is becoming very crowded as people are becoming more and more aware of this. I think eventually vol markets will come closer and closer to efficiency. Although lot of the skew premia etc. has to do with having to price moves outside of 2nd std. deviation, and anything at that level relies more on human psychology than rational calculus. And as fear is stronger than greed, let's hope it remains so in the future to continue to enable outsized returns.

Welcome to the thread.

I've tried following what atticus says for years at ET. I must be too dumb. However, I get the distinct impression that there are several posters over there including him who are much more interested in how great a trader they are perceived to be on a web forum than actually providing any useful information.

Can you give an example of a short gamma trade? Most of this thread is about selling theta, so I'm curious what you do.

I think the same can be said about any forum anwhere. Also, information provision is only one small part of participating in any forum, it can also be about debate or even just passing time. but people like atticus i feel have provided a great deal to the forums and has some very valuable insights, ie. the linked thread above. it's one of the best ways i've seen to exploit skew...



Short gamma is the flipside of being long theta, so any long theta trade would be short gamma. that is where the risk goes, along with volatility risk. if you move further out from expiration, volatility risk overtakes gamma risk. i do the same as anyone in this thread, i am long theta, although i use almost no discretionary methods, it's pretty much pure exploitation of systemic alpha, not subjective timing of trades. i can afford such luxuries as again, vola markets are vastly inefficient. i'd love to learn how to subjectively time trades but my personality is that of a quant. i need quantification and fixed rules to abide by...

Sorry, I am confused. I sell, so I believe I am short theta. You are long theta? Are you long calls and puts? Sorry for my misunderstanding.

long any option is not long theta. if you are long any option you are by definition short theta. so by logic short any option would be long theta, and short gamma. and short volatility....

Yes, you are correct. I get mixed up because I am selling time premium. I was also confused by your statement "Short gamma is the flipside of being long theta, so any long theta trade would be short gamma." since flipside means opposite. But I understand that short gamma = long theta.

Thanks for clarifying!

Wow, I had no idea there was a 70+ page thread dedicated to options..