[trader220]

Originally Posted by JMS935

Ironically it’s also how I used to trade too.

I would frequently be long a sh|tload of the underlying futures and still be short a bunch of downside puts as well. I’m a former grain options trader, and when those futures broke, volatility tended to as well.

I can't comment on the grain markets, I don't know how to price the futures and therefore I cannot price the options on the futures. I am sure there are costs to carry, move, deliver grain I know nothing about.

If you're trading any equity based derivatives you can stand there long each day but its not an easy way to make a living. The other kicker is the cost to carry long stock is easy to calculate and fairly stable. Since the options are on the equity and not the second derivative as in options on futures, the options already have the cost to carry everything you need priced in them. Then again if this were the old days and you could actually stand on a floor and trade as an options market maker you'd subscribe to the old mantra that calls and puts are really the same thing and you can adjust your delta to be anything you like. You're either long or short premium, put or call is meaningless.

On the other hand, I think it was 1997 or 1998, I traded DELL as a single listed option in Philly. Crowded pit with tons of volume. I was pretty much long delta the entire year and it worked out pretty darn well. Paper bought calls and sold puts day after day. We would stand there and buy the puts from them and sell the calls the calls to them, and buy a truck load of stock, easy money. Everyone was happy. All that public paper did okay, the stock went up and up, we all made a killing taking the other side of their trades.

Sorry I am just waxing nostalgic for the old days.