Exercise

[ny_quant]

There 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.

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

— The Kobeissi Letter (@KobeissiLetter) September 16, 2024

Comments

[mb-b.livejournal.com]

> Look at data below and design...?

[mi-b.livejournal.com]

Вроде, временной структуры не хватает?

1 year straddle?

[tuzzeg.livejournal.com]

Интересно, 1 year straddle (https://optionstrat.com/build/straddle/SPX/.SPX250919P5625,.SPX250919C5625) как раз выходит на breakeven при ±14%.

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.

[ormuz.livejournal.com]

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!

[oldkettle.livejournal.com]

My problem in this case is not shyness but cluelessness. It is obvious the graph is a mirror, but there is no intuition whatsoever how this could be used — based on the observation that $100 bills don't normally lie on sidewalks, i.e. premiums will probably eat up any possible profit. It does look like there is no need to go for 12m options and 8m would be sufficient, but this is it.
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.