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Call vs Call strategy
Hello all,After enjoying the content from your forums and learning quite a bit I feel bad that my first posting is a question rather than assisting somebody else but.......What is a Call vs Call strategy? All I can figure from Google is that involves equity index swaps in some way. If anybody can shed some light on the subject or perhaps point me in the right direction I'd be very grateful. Perhaps it goes by a another name?Many thanks.
Call vs Call strategy
It is a broad term that could apply in any situation where you are long one call and short another. So it is difficult to say more without knowing the context.If it involves indexes then it is perhaps referring to a type of dispersion trading or correlation trading (q.v.) where you take a position in calls on the index against opposite positions in calls on the index members. This has been mentioned on Wilmott before.
Call vs Call strategy
Acastaldo, that's exactly what I was looking for.Thanks so much for your help.
Call vs Call strategy
So is stat arb (pairs trading) a form of correlation trading?
Call vs Call strategy
Correlation trading is a form of stat arb. Cointegation on basket is also part of stat arb. The basket can contents more than 2 assets. When basket size = 2, we say pair trading. Finally, stat arb is part of relative value arbitrage.
Call vs Call strategy
however, two different set of people trade different structures. the statarb-ers usually trade delta 1, while call v call has optionality.would be interesting if the two traders could meet in the market, and create liquidity. Do you see any signs that this happens already?