The Newfound blog (@choffstein) has covered this well and was super cool to read since options is my native language so seeing how he did this translation to other strats was very edifying.
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also, just because something has convexity, doesn't mean it has the same type as a vanilla. like people want to equate the changing leverage of an option position with the kelly criterion even though the leverage doesn't change in the same way
You can trade futures to replicate a straddle — this looks like TF and provides the delta component of option pnl over a horizon “dt” which is the time between trades. You don’t get theta, gamma, vega etc. But over multiple trades you get a gamma-like profile (minus jumps),
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specifically you get convexity over a period T only if T >> dt. This is actually good because it’s what allows TF to be +ev even though option buying is generally -ev.
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Real world TF strats don’t exactly have an option relocation profile but they are similar, they generally have max/min position (representing delta going to +/-1) main difference is that TF positions are normally sized 1/vol whereas options have constant notional.
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right. replication => tf but tf=/=> replication of a vanilla straddle
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Don’t need any fancy calculators. Can try rolling dice, or using seed trees. Personally, I like the Sidial Special. Know where the magnets are, just set and forget. Need to be conservative with capital though, lower strikes have more interest too.
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