Recent content by Mattycakes

This is a very interesting topic. As sle says, most of the tools of the trade are highly proprietary, and its unlikely anybody wants to give away their secret sauce. Still, I'm sure many (myself included) would find it helpful if a few furtive hints could be cast as to what kind of tricks others...

If you're dealing with those kind of wings, its probably best to eschew explicitly calcing the theta decay (unless you're capturing the daily steepening of the skew) - you'll probably finding your model telling you it quickly becomes worthless, while in reality it'll keep a bid. I'd say to just...

I second. Spot on portrayal about life in a bank (albeit one with seemingly no risk mgmt). Also, 'Traders, Guns and Money', 'The Poker Face of Wall Street', and 'Ugly Americans', the later a portrayal about trading in Japan.

When VIX futures expire, there's exactly 30 days to the next option maturity, ie at expiry, there's only one strip to trade. I assume that exchange for physical is the contract settlement at maturity (the strip the vix settlement is based on), and that you can't convert it into fwd var at any...

Hi sle, Can you explain this, or help point me in the right direction? I know there should be a convexity adjustment related to the variance of the Vix futures itself (http://cfe.cboe.com/education/vixprimer/Features.aspx), but intuitively, I don't see where this is coming from. If t1 future...

Agree - I'm certainly not proposing there is an arb here, nor would it be sensible to engage in it if so. Rather, my interest in this ostensible vol mismatch stems from extrapolating it out further in time and considering if using SPX vol to price say a 7y SPY option is the correct thing to do...

Back of the envelope calculation: ATFM vega ~ 40bps x sqrt(T) so 0.4% x 1.414 x $1250 x 0.3vol x 2 (put and call) = $4.2

Thanks Atticus. I'm not entirely sure I agree that 30bps is insignficant. Its about $4 on the Dec13 straddle, which is almost the entire bid/ask spread the floor would quote. I suppose it depends on your application - if you're taking an outright vol position, sure its nothing, but if one...

Hi, I'm having difficulty reconciling long dated vol of ETFs vs its benchmark index. For example Dec13/14 SPY vol seems systematically cheaper than SPX vol by around 30bps. Is it possible the screens are just biased low on the etf since the smaller contract size makes it easier to...

Risktaker, you're reading way too much zero hedge to be healthy. Cut back man.

I'm in the same boat. Anybody? Thanks.