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Dear friend nononsense, Would I be a firm believer in Santa Claus, I would still be trying to decipher Jack's sophisticated charlatanism. I have never refered to Engle's capacity to make money in the markets. However, allow me to be more confident in his theory and maths than in Jack's...

Thanks a lot dude!

Gamma's curvature oscillates between convexity and concavity, depending on the spy's price. When gamma is convex, theta is concave, and vice-versa. Gamma curvature is mostly useful for exotics and portfolios of vanillas. Dont bother with it for a single vanilla.

1000% can mean a lot..... of luck. And will most likely. Hedge fund managers with 30% returns often offer low market correlation and low volatility. They also have experience and economically sound strategies that give a hint to the industry that their high returns are here to stay. Numbers...

I find the explaination quite arid too. The thing, calpump, about what you described is that once delta hedged, an option is still exposed to gamma, which is due to convexity of option in spy's price. As spy moves, you incur losses due to this convexity. There is no free money in finance: as...

What's funny is that often a good innovative, profitable, backtested but not yet traded strategy is cheaper and less risky than entering a fund with good past performance at a random point in time. When will people start to learn that under rationale expectations, past track record is no...

The idea is that the trader who hits your quote either detains directional information on the asset or not. If he does, you lose money. If he does not, prices revert to their previous state, and you gain money. The point is to trade on noise, and to get out of the market early when...

Here are quick thoughts. "Volatility" in financial markets is the 2nd moment of asset returns distribution. Since returns are not distributed normally, volatility is local. Higher moments can exist because of conditionality of volatility in return, price or time. Examples of that are skewed...

This document approaches both the trade duration and the volume factors, in addition to a few others... http://www.uwasa.fi/~sjp/Conferences/fss2001/papers/Engle/Engle1.ppt

Now that's interesting... Are you saying that periods with shorter trade duration were more noisy? or markets with shorter trade duration were more noisy? If the former, you should look into autoregressive conditional duration (ACD) models as a way to identify periods where more noise...

Quote from rufus_4000: Such high frequency data analysis and trading more closely resembles game theory rather than any finance theory or TA. It does not ressemble, it is! Quote from Grob109: It is not difficult to rationally go to work on figuring out how to have an advantage...

There are three mathematical "effects" at play here (from simplest to more complex): gradient, divergence and curl. A former French poster in ET would acknowledge this smartly and thoroughly. The algorithms' propensities work inversly with respect to the importance of the market flow...

Seeing as how algorithmic trading is reactive rather than proactive, a sharp human trader should be able to pick up on some variables that the algorithms are triggering off of. I have successfully scalped US stocks since 1998 (first Naz, now NYSE), but I cannot seem to pick up the logic behind...

Montreal here.

Quote from straddle_me: from what i gather, it's not as easy as theory to delta hedge. let's say the trader thinks 20 vol is low, he isn't just going to hedge at 23 if that's what he thinks it should be; he will watch the mkt and take delta risk at certain points. That's pretty much it...

Actually I would not make such an analogy. Understanding the value of what you trade is always worth something. Regardless of frequency. An arbitrageur or market maker can follow the order flow closely, but if he gets stuck on one leg or with residual inventory because of a bad news, he's...

How does having a single person doing this prevents further transaction costs? It's the same desk, two traders can trade one with the other. It's a bank after all. I wouldn't want my gamma rebalancing P/L to be in the hands of someone else and see my bonus vaporized if implied vol gets desynched...

Actually, thinking of it, it's quite funny that the vol traders at your place dont do their own hedge. Seems like inefficient separation of tasks... cosine

Of course information risk exists! Information risk is why trading is "expensive". Homogeneous information explains liquidity, and heterogeneous information explains market frictions and trading gridlocks. The more heterogeneous the information is, the highest the informational cost of a...

Theoritically, you use 'real vol', adjusted for *many* things. However, since the delta is computed from black scholes, this is much more art than science. Black scholes is theory far from practice. Among factors to consider: - Transaction costs, and variance of P/L you can support. This is...