Kris Abdelmessih - Life Through a Volatility Lens (S7E10)
Flirting with Models
Bet Expression All the Way Down
Buying calls while selling stock can effectively express a directional bet, particularly when calls appear cheap on an absolute basis. It is essential to match the best option expression to the chosen directional axis. The misconception surrounding put-call parity can lead many to overlook this strategy; even when bearish, purchasing calls can be advantageous if the volatility surface is cheap. This contrasts sharply with the popular impulse to liquidate positions by selling calls, a misguided tactic due to a lack of understanding of volatility dynamics. Acknowledging this can reveal why certain calls are undervalued—many investors lack a vol lens, resulting in mispriced options. By structuring trades correctly and incorporating a volatility perspective, one can optimize investment strategies and avoid common pitfalls. Ultimately, while ideas in investing are important, the practicality of executing well-structured bets based on informed analysis is what drives success in managing money.
