Schmu

I think the major risk to this strategy is in a rising interest rates scenario where neither treasuries or stocks are doing very well. I've played around with adding a small percentage of short XIV to the mix at the expense of some of the treasuries but it's hard to tell how well this would do when the last time rates went up was before most of these securities even existed.

Paul, it's because while you're locking in your gains on the positive side, your taking chips off the table. Since the general idea behind these trades is increasing IV and not just as a gamma play, you really wind up cutting a big part of the trade short before the IV can potentially increase (or alternately drop). In the end, I might have been getting a slight benefit from the scalping (in a low IV environment), but I definitely wasn't sure it was worth the effort. Regards, Schmu

I started doing this (scalping to stay neutral and secure gains) in the second part of last year as the volatility started dropping, but found that I was basically trading big losers and big winners for smaller losers and smaller winners. In the end, the effect was largely neutral.