I have been seeing this being discussed. What does it mean and what would happen if there is one and it were to burst?

  • mr_world [they/them]
    ·
    2 years ago

    The strategy isn't mine, it's cribbed from Barclay's. They developed it in response to the meme stock craze. They take stocks, given them a score (the exact method of calculating the score is proprietary). The score measures the spread between IV and realized while also taking into account the historical data for the stock and its sector. Then the ones with the right score, ie the ones with the large positive spread between IV and realized, means you sell options. You make money off the premium because people are paying more due to the high IV. When the spread is narrow, you buy options because premium is cheaper than normal.

    I'm not super duper educated on stocks and finance. I got started with GME and have been trying to learn as much as I can because I think it gives me an edge as a leftist to understand how this shit works. It's a lot harder to argue against my criticisms when you can't weasel out of arguments with technical details, like capitalists love to do. It's why I was a big proponent of c/finance when it started. A lot of people who got into this stuff last year stopped after GME floundered. I just kept going and tried to understand why people were wrong and the mistakes made. I've waded through a lot of terrible youtube finance people and stuff to find the nuggets of criticism and real information.