Look at the risk graph of each strategy and you’ll see why.
Blackhat165 on
For some reason I’m more comfortable with the possibility of losing $80 than I am with potentially losing thousands. Some of us are weird like that.
optionalitie on
Put ratios are good if you have good skew in your favor, meaning your long leg has significantly less implied volatility than your short legs. You can create a large profit zone before your shorts are challenged
4 Comments
Look at the risk graph of each strategy and you’ll see why.
For some reason I’m more comfortable with the possibility of losing $80 than I am with potentially losing thousands. Some of us are weird like that.
Put ratios are good if you have good skew in your favor, meaning your long leg has significantly less implied volatility than your short legs. You can create a large profit zone before your shorts are challenged
Same as any other hedging technique.