Trying to better understand this statement: "Went into Monday long RTH & 1-DTE straddles…". IIUC, this is talking about the Variance Ratio Conditional trade from the "Straddles and Variance Ratios" post.
The logic given there is: "Ratio’s used are Close-Close vol / Parkinson (GK). For Long 1-DTE Straddles, when ‘fast’ ratio <= ‘slow’ ratio, buy 1-dte straddles (>= for short 1-DTE)."
I tried computing these for Friday, and got 10-day ratio as around ~1.499 and 21-day ratio as ~1.485. In that case, strictly following the logic above would mean we would short the straddle on Monday morning.
It is possible I have completely misunderstood the strategy, or there is a bug in my calculations. Will be very useful to get your thoughts.
Just to update: I was able to get the same ratio as yours by using the TTR R package as you recommended in one of the posts, instead of my buggy hand-written code :)
Hi Michael,
Thanks for the informative post!
Trying to better understand this statement: "Went into Monday long RTH & 1-DTE straddles…". IIUC, this is talking about the Variance Ratio Conditional trade from the "Straddles and Variance Ratios" post.
The logic given there is: "Ratio’s used are Close-Close vol / Parkinson (GK). For Long 1-DTE Straddles, when ‘fast’ ratio <= ‘slow’ ratio, buy 1-dte straddles (>= for short 1-DTE)."
I tried computing these for Friday, and got 10-day ratio as around ~1.499 and 21-day ratio as ~1.485. In that case, strictly following the logic above would mean we would short the straddle on Monday morning.
It is possible I have completely misunderstood the strategy, or there is a bug in my calculations. Will be very useful to get your thoughts.
You are correct, the RTH position is opened at market open, but known from prior close,
position for Monday was long 1-dte & long the straddle at RTH open.
10d ClclPark .958 vs 1.4966 1mclclpark -> long rth straddle
10d yzclcl 1.93 vs 1.067 1myzclcl -> long 1-dte straddle
sent ss in dm!
Got it thanks!
Must be a bug in my numbers as suspected.
will send historical positions in ~hr, check dms
Just to update: I was able to get the same ratio as yours by using the TTR R package as you recommended in one of the posts, instead of my buggy hand-written code :)