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out of curiosity, while we are at it - what's a good broker for writing index and single stock options? let's say one wanted to trade 100k in total.

In single-stocks, my expectation would be that the ats might trade tighter and even that would be a surprise. The idea of an market-makerless exchange assumes that a product is liquid to the point of always having bid and offer at the same time. In single stocks (and even in most indices), there...

Well, actually a buyer of gamma profits from ANY moves in underlying as well as profits from increases in implied vol. Seller profits from lack of moves and from passage of time. 2 vs 2. If there is a reason you think that being short gamma is better, it's mostly the gap risk.

given that variance swaps are priced by replication, they are nothing more then a static combination of a bunch of straddles plus some dynamic hedges in the underlying. so, MTE is right after all...

If you are asking what I think you are asking, then - when legging into a spread (opening the position), you should get into the long gamma leg first. This will limit your exposure in case the market moves against you while you waiting for the other side of the spread to come in at your price.

General wisdom that I have learned a long time ago at Bankers Trust (with respect to both options and any other spreads) goes as follows Legging the spread is like spreading the legs - you might get f#cked This said, you might not have a choice (i.e. if the MMs are trying to pull a quick...

Oh, come on, you do know the greeks and you have heard of quadratic equations, haven't you?

Ahm. You have delta, you have gamma, you have original price. From Taylor expansion, you can describe the change in option value as Change = UndChange * Delta + .5 * Gamma * UndChange^2 So, solving a quadratic equation (3rd grade, i recon), we get Double Change = [ -Delta +/-...

True. I need to use subs to keep track of the trades that where done and to keep a small history of last N ticks. Otherwise, the decision to rebalance can be all done from a single function.

it's all IR derivatives. i have a large mix of products, from futures options to OTC vanilla exotics. trick is that all of the delta calculations and adjustments are already worked out (i.e. relative amounts, substitutions etc), all i need to have is an auto-hedge system. It's really more about...

VBA is not an issue, i am rather proficient VBA programmer, I have a bunch of rather complex calculations of the amounts of delta (yield curve + skew dynamics etc) that I wrote in VBA long time ago, i want to keep using them,. It's 14 futures, but same thing. So far, the main issue was that i...

I'll be using RBS institutional toolkit for that, but thanks anyway. Truth is that there is very little that I am trying to do - i want to have my delta hedges executed automatically, possibly with some simple rules deciding on the best levels to rebalance the book. There are only 14...

I am pretty new to automated trading, but am trying to set up a simple real-time trading system. There are 14 securities I am planning to trade, so I figured that Excel should be able to handle it rather well. The actual trading method is not important, so far I am trying to set up the...

Being on the OTC side of the world, I never actually got deal with risk-based haircuts. Could you explain a bit?

You mean a market-maker? Having a short gamma bias is a way to go (in general) for a market-maker.

In general, any kind of contingent payoff product, be it options, digitals, barriers etc. has a parity relationship that would allow any sane person to figure out the spread in vol/probability terms. In case of digitals, Touch + No Touch = Payoff is the main one. The other calculation worth...

Get the current CTD (DLV function in Bloomberg will do it for you), then divide the price by the conversion factor, then plug in the resulting price and the maturity of the bond into any bond calculator. For slightly better result, you might need to do the switch option calculation, but that's...

No, we are only talking about real theta, carry and roll-down aside. Usually it involves taking advantage of either steep vol term structure or a massive skew. For example, selling a lot of log-dated wings is a good example. In most of these cases you'd be massively short vega in the short...

Dude, what do you trade? Debits and credits are meaningless, what matters is decay P&L vs delta P&L. It does not matter if you get into a butterfly as 1x2x1 or as strangle-straddle, but it does matter that you are short gamma, long theta. Any view on undelrying, realized or implied vol can...

A very neurotic one one. Any short gamma lifestyle is rather neurotic.