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From the perspective of the single strike, you don't care if the vols move due to overall change in level of vols or because it's a restrike of the surface (that is, "slides along the skew"). It's still vega P&L and now you got an option with new implied vol. If it's rich, you sell it. If it's...

Not a stupid question at all, actually. -- general thought is that if you are delta hedging, your expected p&l will be sum of Gamma(t) * (RVar(t) - IVar(t)), which means that every day you going to be realizing the moves and weighting them by gamma -- in a simple form, the above means if...

(a) Market makers (OTC and listed) use various models of volatility dynamics for both pricing and hedging. LV/SLV are accepted in the FX/EQD community, SABR is more or less standard in the rates world. More exotic models are used for various properly exotic products, though these days there is...

I don't think that's right. If you were trading daily options, it would be 6 "2-SD move days" (6 = ND(-2) * 252) indeed. However, she's trading longer dated X-delta options - means that she has bad expirations at that threshold. In any case, most of her risk (as with any leveraged tail...

The way the index is constructed it depicts "low" skew when the ATM vol (or variance) is high, so with VIX coming off today, the skew index appears richer. The skew is a very complex beast and it's pretty hard to represent consistently. Nothing to see here, move along.

I know who you are talking about. He was, however, much bigger news then Karen :P

From flys, in this case, since you are doing it bucket by bucket.

You have a leveraged position on - you don't need for both to happen, you just need the expectation of either happening to go up. I.e. you are short two high-vega-convex wings and vols go from 25/15 to 30/20 on the two wings respectively. You margin will kill ya...

I recall similar statements being made about Amazon, email etc. As a technology, cryptocurrency is pretty interesting and I think we will see a lot of awesome things in that space. Early run-up is normal, every new promising tech usually first prompts a bubble and takes a few years to become...

(a) I certainly hope that you are talking about short calls (except in some really extreme cases) (b) there is an easy way of predicting when you are going to get early assignment (c) if someone assigns you on your short puts early, it's a windfall (i.e. a good thing)

IMSMR, it references Texan cattle ranchers who go long cattle futures while already owning cattle. Oddly enough, it makese perfect sense from a producer point of view.

Let's take a different example... If you are selling hurricane insurance, does selling drought insurance make you "hedged"?

Really? How is selling convexity on both sides of the distribution is "hedging"?

Yes. "Stupid girls get spanked". It's true in trading and everywhere else.

Actually, on relative basis the skew is an attractive sell when other risk premia is not. Far OTM wings is an actuarial game, you are taking event risk colateralized by your magine and getting paid for it. Gamma and vega are much more controallable risk premia with very low probability of...

Every trade is dangerious if the size is wrong. You can generate very reasonable returns selling skew if you do it (a) when the time is right and (b) control the size. It's an event-actuarial business, not any different then selling hurricane insurance - as long as you are capitalized well...

Or a combination of number 1 and number 3, that is she got lucky and the results are not fully presented. In addition to 1 and 3, she probably (a) manages the size intelligently combined with (b) her investors are somehow gated and can't pull the rug from under her at the worst time. It's a...

Come on, the industry is full of smart people and everyone is doing more or less the same thing. It's hard to imagine that she's doing something that revolutionary, especially with her AUM and background.

Niederhoffer has been trading for a while too, it takes a real event to wipe a tail-seller out. More importantly, you don't know if she blew up and re-started the fund multiple times - "good" fund managers manage to raise money multiple times despite repeated blow-ups (again, see Niederhoffer)...

I do not mean that you assign any statistical significance to these events. Mostly surprised that you are feeding genuine human tragedy to the trolling public on ET - you must have seen the prior thread on this topic.