There is no better way than doing. It’s not slow. These things will hit you like a freight train. You either get vol or you don’t. For me, the first month of running my own options book taught me more than all my derivs/vol classes in school combined.
You can read about convexity until you’re blue in the face, but you won’t really get it until you watch the interaction of every leg in your book and the resulting risk/pnl. Once you see that, it’s like ascending to a higher plane.
Much appreciated! Talking out loud, as you obviously know all this:
> You either get vol or you don’t.
I think I get it, on a conceptual level -- option prices include the market's expectation of future underlying variance, so if you subtract/hedge-out everything else, you can trade that fluctuating expectation. With dispersion, you're taking advantage of index options and those of the components eventually converging, while being mindful of the changing correlation of components.
> you won’t really get it until you watch the interaction of every leg in your book and the resulting risk/pnl. Once you see that, it’s like ascending to a higher plane.
You're spot on. I can tell I'm missing something "clicking" at a more intuitive level in my head, something that feels close, because my book almost does what I expect, but.. there's always some "error" in the pnl at the end of the week. So I must be missing an "aha" moment.
> There is no better way than doing. It’s not slow.
My "real job" skills (C/C++, numerical programming, systems engineering) I only learned by doing, I guess no reason to expect this would be any different! Though, I can easily write and test code on my laptop with no consequences if it's wrong. I feel like I'd learn fast if I could set up a trade experiment, click a button, and then see how it fared at the end of the week, immediately, instead of waiting the week. I've got dozens of questions I think would be answered quickly that way.
But you're right, the path to learn more is clear, I'm gonna start paper trading those experiments.
Thanks for your comment, it's really encouraging. I can't wait for Monday.
> my book almost does what I expect, but.. there's always some "error" in the pnl at the end of the week. So I must be missing an "aha" moment
Depends what that thing is, but most likely you're not. If your pnl/risk expectations have the correct direction, and rough magnitude, I would say you're doing pretty well.
What sort of strat/structures are you wearing at the moment?
You can read about convexity until you’re blue in the face, but you won’t really get it until you watch the interaction of every leg in your book and the resulting risk/pnl. Once you see that, it’s like ascending to a higher plane.