Zerohedge options recommendations for HFT algos

[Emptyeternity]

Saw this on Zerohedge (leading economics blog), a nice straddle strategy similar to Steadyoptions earnings trade, buy a straddle with low IV and ride it out. There's a list of 50 stocks to choose from. Any way we could narrow this down further or use this?

 

http://www.zerohedge.com/news/2015-06-08/50-most-illiquid-stocks#comment-6175893

 

As a result one possible trade idea would be to put on a long-term straddle (preferably while VIX is still cheap) on some of the above names, and hope for a volatility shake out, either to the up, or downside.

 

[Marco]

not too many names that are liquid from that list and I imagine they come with a very high implied vol, so if the expected move (short squeeze or drop) doesn't come you'll face a high theta bill.

I'd compare that strategy with holding straddles though earnings. The market knows that there will be a move and prices in expectations. If market underestimates the move you make a lot of money but more often than not the move will be below expectations and you lose money being long options though the move.

 

I love Zerohedge but more for their cynical view on things, some quick market info and some insights (like the one you shared) that you don't find at (many) other places. I wouldn't advise using their general market view for trading - they're always bearish

Edited June 9, 2015 by Marco

[Emptyeternity]

not too many names that are liquid from that list and I imagine they come with a very high implied vol, so if the expected move (short squeeze or drop) doesn't come you'll face a high theta bill.

I'd compare that strategy with holding straddles though earnings. The market knows that there will be a move and prices in expectations. If market underestimates the move you make a lot of money but more often than not the move will be below expectations and you lose money being long options though the move.

 

I love Zerohedge but more for their cynical view on things, some quick market info and some insights (like the one you shared) that you don't find at (many) other places. I wouldn't advise using their general market view for trading - they're always bearish

They are bearish, but looking at fundamentals its hard not to be. I can't find a better no bullshit blog (except from the sponsored articles of course), they were on the HFT phenomenon before anyone was. I usually find they are 5-6 months early on the financial news that later filters down into the mainstream media (filters).

If only there was a way to filter the list to see if Big Money is buying one of these ahead of time...got any ideas i.e. IV, relation to any indicators.

[Marco]

Although I started as a single stock trader my trading has become nearly 100% macro now (i.e. I trade indices or ETF on gold, bonds etc) I find better liquidity, spreads and can control risk better so can have bigger positions. So therefore not too much input on that list / idea I'm afraid but I just had to comment as a zerohedge follower.

Totally agree that they were well ahead of the HFT topic, well before the 'Flash boys' book. I'm surprised by the way how little regulators have picked up on the topic and next to nothing has changed still even after all that publicity.

As much as I appreciate their insights I would maintain that they are always bearish. You say fundamentals justify that view - I would argue the picture is rarely all bullish or all bearish and they have a very biased view - you never find any positive research/views on anything there. So oil was crashing they argued against the 'more money in the pocket of the consumer' view and kept citing job losses at oil companies and the negative effects on the U.S. Economy and when it recovered all of a sudden that was bad for the U.S. consumer... But as most other media has a bullish bias you can look at ZH whenever you feel too bullish and they make it entertaining (if you appreciate a bit of cynicism) so I still rate them highly and read their tweets and articles pretty much every day