stickydelta⚽⚽

Great thread! Adding notes to self (not an advice): 1- A tail hedge isn't a strike, it's a bet on a spot-vol path. A 1m 10 delta put pays in a gap, where spot-vol beta is high, skew steepens, and dealers are short gamma. In a 6-month grind, realized vol stays moderate. As spot falls, your strike moves from the wing toward ATM, so its implied vol rolls down the skew. You can be right on direction and still lose to theta. 2- Try: rank tails by scenario payoff per $ of carry, not by how cheap they look. Test the liquid tenor/strike combinations against a gap and a grind. 3–6m puts rolled early usually beat serial 1m wings, but might sacrifice liquidity. 3- Fully agree on nickel vs dime: same budget, 2x the convexity. But the mirror image is exit. You'll be selling wings when spreads have blown out and everyone wants the same thing. A pre-committed monetization rule (restrike on delta or vol thresholds) is what turns mark-to-market gains into banked P&L instead of a round trip. 4- On funding the bleed: most "uncorrelated" carry turns into short vol in exactly the state you're hedging. If the funding leg has negative convexity, you haven't hedged, you've netted. The hard part isn't buying the tail. It's managing the path dependence.

Wedding rings to encourage togetherness and oneness. Math.

Quick mini thread on tail risk hedging thanks to my man, @Fink_Money Tail hedging is a pretty complex topic and there are 10 more reasons why it can be challenging for a smaller investor to implement. But two of the biggest limitations from an infrastructure perspective is understanding what exactly to buy and how much to pay. Trying to execute on those two simple concepts have further nodes that have its own challenges. Ultimately, you’re trying to answer two questions. Which tails do you want to own, and at what price does owning them make economic sense? A static hedge can struggle even if you’re right about the crash. Say you only buy one-month, deep OTM puts, and the market takes six months to grind lower, with sharp rallies along the way. You can be right about where spot ends up and still watch one set of puts after another expire worthless. That’s why I don’t put much faith in one-trick-pony hedges. You need infra to guide you on a core understanding of which tenors and strikes are likely to reprice based on positioning and how well those options carry as spot moves along the skew curve. Execution matters just as much. Say a tail option is quoted $0.02 bid at $0.10. It’s easy to look at the offer and think, “It’s a dime. How expensive can it be?” Suppose you pay $0.10, spot sells off, vol rises, and the option reprices to $1.00. Your position is worth 10× what you paid, a 900% gain. If you can work the order at $0.05, that same move takes you to 20× what you paid, a 1,900% gain. Getting filled at a nickel lets you own twice as many contracts. That’s where you double your convexity. You own twice the exposure going into the crash because of the infra you have to post liquidity and find a real inside market before spot or vol moved at all. That’s the part I think is hard for a retail investor or a smaller shop to replicate. Even if you identify the right tails, you still need the infrastructure and execution logic to work orders at scale across names, tenors, and deltas, all at prices that make the hedge worth owning. Start adding in how to offset the bleed in a real uncorrelated fashion along with a real alpha focused monetization framework and you have tons of other considerations to make when executing something like this.

People who bought a house during Covid were the luckiest. Especially in Delhi NCR. The same houses are now 3x the price. The people who missed the bus, couldn’t catch up. Now when the prices are cooling down, it’s still beyond reach. Rents have not gone up that much, so people are accustomed to living in flats they can never own. The houses which are in their budget, which they can buy now, will lead to a downgrade in lifestyle. Catch 22.

On of my favorite math party tricks is computing compound interest in my head. "1% per week for a year, how much is that?" Well, 1.01^100 ~ e, and a year is 52 weeks, 1.01^52 ~ sqrt(e) ~ sqrt(2.56) ~ 1.6something.

People talk about doom scrolling, but that's not my feed at all - I see art, I see optimism, I see hope, I see genius... so what's the word for it? Awe scrolling may be?

Everyone hates it when I point out that - systematic trading is hard - you can’t prompt your way to a profitable strategy unless you already know what you’re doing - most people capable of making a success of it for their own account would do much better getting a job at a good trading firm instead But this is literally the highest value thing I do in this site. Every person who takes my advice is hundreds of hours and tens of thousands of dollars saved!

Music has a beautiful way of bringing different worlds together. Collaborating with @HansZimmer on Ramayana has been a special creative journey, exploring new musical possibilities while staying true to the soul of this timeless epic. Grateful to be part of this journey, with so much more to explore and share with you all. #Ramayana #HansZimmer @WorldOfRamayana

Your dream destination for solo travel?

Will be live tonight with @spendwiselyx to go over the Rove bonus offers before they run out! This is probably the best miles sale of the year; if you have summer or new year trips planned to Europe, US, Japan or Australia, this can save you a lot of money! youtube.com/live/iwXTEfR_Oi8 - do tune in. 830PM tonight!