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These posts remind me of a movie about a cretin illiterate gardner who somehow gets to be in the entourage of the vicepresident of the United States and noone is aware of his 'qualifications'. But he's one of the entourage so surely there must be something with him. So during conversations he's...

>> Go trade your own capital and come back in 2026. I'll never in any circumstance hire a guy like you and if you'd have read my post carefully you'd have figured I'm not asking but giving. My only problem is that I don't know who's behind that "prc117f" imbecile nickname but that's no problem...

prc117f, could you be less of an asshole, please?

@d08: May I ask how much did the fund have as assets under management? I worked for one that had about $1B AUM, but the options market making desk where I specifically activated had only about $30M allocated. Otherwise a lot of money went into plain stocks or low-yield but safe stuff like bonds.

@d8: trusting people is hard, especially on the internet. I'd much rather prefer to find some local guys to work with but unfortunately I haven't found them yet. I'm pretty sure I'm the very odd exception in the area I live in. I tried local "investor clubs": lame amateurish stuff, mostly...

>> Yea.... we noticed. He heh :D

I think competitive advantages and protecting them from being stolen are real issues in this industry. Because if you get to the point of making money, then you can apply this simple algorithm to carry a conversation with a potential collaborator: a) Do you make money? If not, thank you, the...

Do you backtest before going live with a (new) strategy? Do you use some own-written or commercial software to scan for opportunities according to your rules? I've written my own backtesting stuff and have been experimenting with it since a long while. There's no point going live randomly and...

I still think you don't understand what I'm proposing, but that's also my problem for not explaining it right. I'll refine the idea and put in in a written form (i.e. publish an article), get back to you and see where it goes.

>> Tibster: Why not build a synthetic short and add some OTM call and puts to cap it? Because I want to buy or sell those options myself :) >> sle: I was going to provide some thoughts on the topic (since I have traded OTC products for some 15 years both as MM and as a PM) but after reading my...

Also I need counterparts for my OTC options or there wouldn't be a ground for me to trade those OTC futures (which I use for hedging those options).

>> As long as you're happy with the idea that the prices of the "capped/floored" futures contracts could be different to the vanilla, I am happy to make you a mkt. Yup, I don't care much for the future price (and spread) as long as it's within reason. I get my profits from trading options and...

And if you have capped CFDs, using those as the arbitrage instrument instead of the real stock, then you can also price futures, for which the formula becomes again, exactly the same as for regular exchange-traded, uncapped ones.

That's why I'm not bothering with futures and just using CFDs. You don't need to price those, they are already priced by the market, at the spot price of the underlier. Options, on the other hand, are entirely priceable under the same regular arbitrage-free assumptions, using the capped CFDs...

That's because regular assumptions about arbitraging a future do no longer hold for capped ones. Let's take the case where interest rate is zero and dividends are zero. Say you sell the future at $51. Under regular futures you'd borrow $5000 from the bank and buy the underlier. Then you've...

I'd have to think about it. By default I'd say that if the interest rate and dividend yield of the underlier is zero, then the risk-free fair price of both the regular and the capped future contracts is precisely $50. As a market maker you add some margin. But I'll have to think about the...

>> @Martinghoul: I am happy to give you an example, using the underlying of your choosing. I'd like to see your example on the cash-settled OTC future example I gave above.

@Robert Morse: >> I'm trying to keep this simple, because it's very difficult without a real conversation to explain. Yes I work for lightspeed, a broker, but I was a Trader first for many many years. >> You seem to think that someone else will be willing to cap your losses in a transaction...

>> How much are you willing to pay for this "ease of use"? I'd pay just like I do now: commission per trade. Right now with IB I'm paying $5 for executed order and nothing for just quoting / requoting / cancelling orders. Commissions are obviously negotiable on volume.

The pricing of options changes fundamentally but the actual price of around-the-money options stays pretty much the same. Only long tails and the impossibility of predicting that would effectively disappear.