Search results

a/c = autocorrelation

Wrong answer :) Your delta is highly sensitive to the implied vol, especially for very wingy options...

You do realize that in case of options on futures (e.g. VIX futures in this case) there is no difference in pricing of American and European options?

It's because different VIX futures are related between each other by root-time. So, UX1 vs UX2 "beta" will be around 1 + sqrt(1/12) ~= 1.3

The harsh reality is that you can lose more then the initial premium on a delta-hedged position. Both long and short, actually.

Why only BS world? Not exactly true, either, however, it's a trick question why not...

Another one, about bond bookies: http://www.xtranormal.com/watch/7644373/

Rolling on the floor... THIS IS SOO TRUE...

Makes a lot of sense. When I came over from the sell-side where I was running a book full of swaptions, it was hard to change my habits, but eventually I realized that running fewer trades and having them ultra-well organized is the way to go. Wrote you a PM as not to pollute this thread with...

Out of curiosity, how do you mark your vols for deltas - at implied, historical or expected?

Yeah, the X-mass quiet... In terms of selling straddles - you want to find (a) an asset which you expect to realize lower then implied and (b) an asset with high a/c. In fact, AC might be even more important then the actual vol, if you hedge judiciously.

Yeah, holding protection is frequently (a) very hard and (b) goes against you when other trades go against you too... Risk-management-wiste, do you organize them trade by trade or do you look at the book as a whole?

Well, experience shows that a factor-neutral position could become an outright long or a short in a crisis. E.g. puts/payers in TY was an RV position up until two weeks ago :D Out of curiosity, how many open positions do you hold at any given time? I found (being an RV player myself) that if...

How does the size of your position change the meaningfulness of risk?

I am struggling to even understand your greek numbers here. Is your delta in dollars or in units of shares? In any case, your calculation if off because you are taking the change in RVX as the change in fixed strike vol. Since RVX (just like VIX) is an implied variance index, its value...

It's called variance swaps :)

CRB Data Service is the best there is - it's fairly cheap too. I would caution that since the introduction of Ultra-long contract, options on Long bond are not directly comparable to the currently traded ones.

So we are talking about the same thing, yes. I just was not familiar with the term "carrying charge" but now that I think about it, it makes sense (cash + carry). Now, you can always do these guys for free by doing 1x2 or 1x3 - it might get painful though.

Not sure what you mean by "carrying-charge". Here is an example: (a) spot VIX is 18.91 (b) Mar VIX futures is 25.91 (c) Your rolldown to spot is 7 points. (d) VIX 25/20 put is costs about 2 points You buy the put spread. If nothing happends, it will roll down to spot and you have a...

Well, thats a big question - "is term structure roll (which undoubtedly happends) an opportunity or not?". Conventional wisdom is that if term structuure roll is bigger then theta (or in terminal terms max(0, Strike - Spot) > Premium), you want 'em puts.