Time Zone Trade - Positive Vega?

tom

tom

Well-known member
Administrator
I saw something briefly about Amy's Time Zone Trade at SMB. The thing I wondered about was Ron Bertino's Weighted Vega. If you remember, Ron showed how Calendar Spreads are essentially Vega neutral. The Time Zone Trade apparently uses a Calendar spread to give the position a positive Vega.

Here's how to calculate Weighted Vega:

You can easily calculate this: Weighted Vega = Vega x SQRT(30/DTE). This normalizes the Vega of any expiration to a fictitious expiration of 30 DTE. While 30 is typically used, you can use other normalizing factors as well.
Click to expand...

https://forums.tradingdominion.com/...-that-weighted-vega-capdisc-presentation.109/

I found an interesting PDF that delves into Weighted Vega deeper:

2019-04-29_23-02-25.png
http://www.topquants.nl/wordpress/w...5/01/Van-Gulik-Risk-management-at-Optiver.pdf

Mark Sebastian also talked about it in this old now-defunct options trading e-zine:
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http://www.snifferquant.com/gyantal.../ExpiringMonthly/expmonthly_vol2no8_oct_1.pdf



I haven't seen the full trade so perhaps I'm missing something. Has anyone seen the full Time Zone Trade?

Opinions?
 
Tom, thanks for bringing this up. It is beneficial for everyone to discuss different trading concepts at open, without any paywall (soon probably even vertical spreads will be claimed by somebody as IP).

I ducked her course:

The Time Zone Options System | SMB Training

Amy Meissner presented her newest addition to our SMB options strategy series. Her new trade is called The Time Zone Options System. One of our favorite features is that the trade is positive Vega — which means that it can benefit from sudden spikes in implied volatility. Watch her presentation...
www.smbtraining.com www.smbtraining.com
Didn't watch presentation yet. In description she write trade uses short DTEs. This may work as vega diminishes rapidly for short term options. Don't know how she structured this trade but suspect challenge will come from short option delta not vega and thus long term option positive vega will dominate total vega position of the trade.
Definitely will check out video.

As a point to consider: imo, it is mistake to think Calendars as long vega trade but aloso it is mistake to see them as neutral vega.
Calendars can act as long, as neutral or as short vega depending on trade structure and environment trade was put on.
 
Marcas said:
Tom, thanks for bringing this up. It is beneficial for everyone to discuss different trading concepts at open, without any paywall (soon probably even vertical spreads will be claimed by somebody as IP).

I ducked her course:

The Time Zone Options System | SMB Training

Amy Meissner presented her newest addition to our SMB options strategy series. Her new trade is called The Time Zone Options System. One of our favorite features is that the trade is positive Vega — which means that it can benefit from sudden spikes in implied volatility. Watch her presentation...
www.smbtraining.com www.smbtraining.com
Didn't watch presentation yet. In description she write trade uses short DTEs. This may work as vega diminishes rapidly for short term options. Don't know how she structured this trade but suspect challenge will come from short option delta not vega and thus long term option positive vega will dominate total vega position of the trade.
Definitely will check out video.

As a point to consider: imo, it is mistake to think Calendars as long vega trade but aloso it is mistake to see them as neutral vega.
Calendars can act as long, as neutral or as short vega depending on trade structure and environment trade was put on.
Click to expand...
Hi Marcas, there were quite a few questions like this so I did a Q&A answering these types of questions about the trade. I believe they posted that video as well. Should answer some of the questions you have about set up and vega.
 
Hi Amy,
Do you have the initial setup strikes ?
I skimmed through the Q&A but I only saw 3 strikes one long and 2 short
Is that all there is ? I am sure I am missing something
This is probably not something I would be doing but I am always curious about other strategies and perhaps I can learn something from it
Is this something you will be bringing to Aeromir as well or is this only for SMB ?
I was wondering if maybe you are spreading yourself too thin with all these many different strategies running at the same time unless you no longer use some of them
 
Thanks Amy for pointing Q&A.
Can you tell for how long have you traded TimeZone life berfore making those presentations?
 
status1 said:
Hi Amy,
Do you have the initial setup strikes ?
I skimmed through the Q&A but I only saw 3 strikes one long and 2 short
Is that all there is ? I am sure I am missing something
This is probably not something I would be doing but I am always curious about other strategies and perhaps I can learn something from it
Is this something you will be bringing to Aeromir as well or is this only for SMB ?
I was wondering if maybe you are spreading yourself too thin with all these many different strategies running at the same time unless you no longer use some of them
Click to expand...
There are four strikes that make up the initial Time Zone trade. A put calendar and put vertical. As far as running myself too thin, this is a static video course, so the work has already been done;-) I had contracted to do a series of video courses with SMB and this was the last in the series. It is possible for me to bring this to Aeromir as a trade alert service or something along those lines, but I don't have plans to do that as of now. I plan to concentrate on the Weekly Playbook service. This particular strategy didn't really fit the criteria of the Weekly Playbook series of strategies other then its short term nature. It was better suited as a video course. Best, Amy
 
Thanks for the reply and the explanation
I am experimenting with a short dated put spread and a longer dated strangle
I only did a few trades and it worked well so far but I have not been really tested
 
I don't know of any official forums but I can set one up at Aeromir. I'd have to have verification that you paid for the training but that's something I could do if there's enough interest.
 
Oh, I forgot about this tread completely. I forgot I watched TZ videos before. I forgor I reacted to it. I forgot, I forgot, I forgot... Sorry for duplicate in another place.
 
I would be very interested in joining a group for this strategy. I just started trading it, and would love to bounce some ideas around
 
Not sure if there are enough traders to make a group but you are welcome to bounce any ideas over here
Did you make any trades with this strategy or are you just starting out ?
Show us your idea and I am sure someone would chime in
 
I'm just getting started. I had my first trade close at a profit, so I'm happy about that! I have noticed that the Vega is much less on the trades at openeing than in the training videos (though still positive) and I am getting a much better credit on the Put Credit Spread (which is great). I am thinking this is just because we are in a market that has an increased volatility profile at the moment, but I wanted to confirm that this is what other people are seeing, so that I know that I am not doing something wrong on my initial order entry. Any thoughts? Thanks! :)

P.S. I will say I am very impressed with Amy and her training
 
Not sure what your trade setup looks like but in general as you already know you are getting better credit on the put spread because of the higher volatility and probably on the calendars as well if that is what is used on this strategy

The question is are you getting any protection on the downside from price movement or is there a plan to make an adjustment or close the trade
Just because you have positive vega from the calendar that is not going to help if price moves outside the tent and below the short put
 
My Vegas are about 1/3 what the plan calls for and what Amy gets on her examples, so there is definitely reduced protection against a spike in volatility. I just plan on trading it according to the rules with small lot sizes for now and track y results. I will continue to adjust per the normal rules if the market moves down. Do you have the course and if so have you been trading it long?
 
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I don't have the course and I am not trading this strategy I just saw the video and I have a certain understanding of how it would behave
I do trade put spreads and calendars but in separate trades not as a combined trade
 
Hi Nick2,
I was wondering if you are still doing the TZ strategy and how are the results
Last year the volatility was still high so maybe it was doing better but I just subscribed to the TZ strategy recently and the results are not very good Fortunately I did not follow the class with the RUT version so I did my own version with SPX and worked out better
Maybe I just happened to trade in a bad environment which always seem to happen when I subscribe to something
but I don't think the TZ is a good setup to work with SPX or RUT There is only about a 30-40 point relative safe range and they can easily move that much in a single day so as soon as you put the trade on you have to adjust it and since it's a short trade by the time the Theta starts to work you have to close the trade Sometimes it's better to do nothing and just wait a little longer and it usually comes back into the tent but I understand you can't rely on that all the time
It was good to learn about some of the adjustment options but I will be using it on different setups
 
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