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ny_quantThere is no doubt that the Fed will cut rates on Wednesday, we just don't know whether it will be 25 or 50 basis points. Look at data presented in the second tweet below and design an options strategy to profit from this. Pros need not bother. Learners - please don't be shy. Comments are not screened.
Markets will be watching to see if the Fed can avoid a recession into 2025.
— The Kobeissi Letter (@KobeissiLetter) September 16, 2024
Historically speaking, the S&P 500 returns +15% within a year of the 1st rate cut if there is no recession.
If there is a recession, the S&P 500 loses *15% in the first year, on average. pic.twitter.com/l6pb09fzss
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no subject
Date: 2024-09-16 07:59 pm (UTC)> Look at data below and design...?
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Date: 2024-09-16 08:02 pm (UTC)no subject
Date: 2024-09-16 08:11 pm (UTC)no subject
Date: 2024-09-16 08:14 pm (UTC)no subject
Date: 2024-09-16 08:28 pm (UTC)no subject
Date: 2024-09-16 08:32 pm (UTC)1 year straddle?
Date: 2024-09-17 05:44 am (UTC)Можно продать put/call для ±20% (https://optionstrat.com/build/inverse-iron-butterfly/SPX/.SPX250919P5625,.SPX250919C5625,-.SPX250919C6800,-.SPX250919P4500), тогда breakeven будет где-то на уровне ±11%, то есть если через год цена выйдет из этого диапазона - то мы заработаем.
Если SPY поднимется на +10-15% - то скорее всего волатильность будет на уровне 10-12%, а если упадет до -15% - то волатильность сворее всего будет под 30%. Можно ещё плечи подкрутить под эти сценарии.
Но если честно, я бы на этот trade не поставил бы.
Re: 1 year straddle?
Date: 2024-09-17 02:27 pm (UTC)no subject
Date: 2024-09-17 05:17 pm (UTC)Historically speaking, the S&P 500 returns +15% within a year of the 1st rate cut if there is no recession.
If there is a recession, the S&P 500 loses *15% in the first year, on average.
а вероятность рецессии какая предполагается? 1/2?
если 1/2 — то тогда это не особенно отличается от любой другой временной точки, если я правильно помню, annual historical volatility of SPX — обычно 13-18%. соответсвенно задача — придумать просто profitable SPX options strategy, и ответ — книжки и руководства по опционам продавать!
no subject
Date: 2024-09-17 05:37 pm (UTC)Annual volatility of returns is one thing. A very specific "known" bimodal distribution is quite another.
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Date: 2024-09-17 05:47 pm (UTC)you might missed "on average" in the tweet and word "median" on charts.
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Date: 2024-09-17 05:50 pm (UTC)https://i0.wp.com/statisticsbyjim.com/wp-content/uploads/2022/03/Bimodal_distribution.png?w=562&ssl=1
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Date: 2024-09-17 06:36 pm (UTC)I get what you meant. My point is that there are no data to support bi-modality in these tweets.
To me, it seems — they took all annual SPX returns >0, took an average and got 15%, and then they took all returns <0, took an average and got -15%. which is totally inline with normal distribution centered at 0.
I can imagine that due to the amount of data — 20 data points of a first rate cut, it could be bi-modal or whatever, but averages (+-15%) don't seem out-of-line from our null hypothesis — the distribution is normal, and "first rate cut" do not have any special meaning.
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Date: 2024-09-17 07:05 pm (UTC)But I agree that +-15% won't be anything special. This is just an exercise.
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Date: 2024-09-19 07:20 am (UTC)The only exception is a situation where one already invests in an index fund hence could use a 10% strangle as you suggested above to hedge against losing too much.
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Date: 2024-09-19 01:21 pm (UTC)I just wanted a concept. Profitability analysts is out of scope.