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The lower volatility of VIX futures in far months has little to do with mean reversion and more with term structure of skew. In short, most of the volatility of VIX futures (the underlying for VIX options) comes from the volatility of SPX - as the spot moves, it "slides" along the skew and...

I would stay away from anything infrastructure intensive or transaction-cost sensetive. You don't want to compete with institutional traders or high-tech HFT shops. Anyone with a smaller pot should be looking for opportunities that are either smaller in absolute terms or not avalible to larger...

As a retail trader with some capital, you are probably more flexible then I am - no arbitrary risk limits, no real mandate and no real concerns about liquidity. If you are not trying to get extreme returns, there are a lot of interesting stuff to do. Personally, I've been researching it more as...

Technically speaking, my mandate covers some delta trading. I also do some relative value stuff like CDS vs equity etc. Fun stuff :) Trading volatility using options (as opposed to vix futures or etfs) is really an institutional game. It takes a lot of capital - even with portfolio marging...

I started in rates and moved into equity derivatives since I was looking for an opportunities in volatility. In terms of number of opportunities, variety of risk premiums and sheer voodoo involved, nothing beats equity derivatives. Rates trading is more about taking delta bets, being a pure vol...

What about gravity? Do you believe it was Jews that invented it or it's an all-Christian phenomena?

Dude, you are arguing with regligious nuts. They don't understand scientific evidence, they don't believe in evolution. I am sure they even think that gravity is a myth - Jews invented it so people would drop their lose change.

Well, there should be some premium for crash because of the actual crashes that have happened. There should be some risk premium for drawdown resistance. But all this taken together still does not explain the cost of some crash puts, especially in exotic variance space.

Well, not really. Short-dated tails are usually overpriced both from the terminal distribution and from the vol perspective. The terminal distribution trades can be something where you thing real world drift is statistically mispriced - for example, I've been investigating if forwards on...

I am stuck at home sick, can't even walk my dogs so this is as close to entertainment as I'd get today :) This one is interesting. Distribution bets (terminal only) are very different in nature vs actual volatility bets where you do hedge delta. Given that options are more or less priced in...

That's easy - at some point risk management kicks in and you don't want to have anything to do with it. Truth is, everyone who "helped" to cover their positions made out like a bandit - I was trading IR swaptions at the time and it was true feast. It's just an ample description of my life, not...

Maybe you do. I blow mine on the trips to the mountains and dog toys :D

Well, with my education I could have been building nuclear weapons, powerplants but I ended up trading financial weapons of mass destruction. If anything, I have contributed :)

The fact that a few greedy idiots managed to overleverage themselfs and blow up does not really prove anything (if anything, they have done very well for themselfs, it's the investors that were left holding the bag). I have been making money (almost certainly more then you make using your...

The market is ultimately about making money. If GARCH models work for you, good. If something else does, good for you.

Bingo! That is exactly the right explanation. Option-theoretic speak would be "a stochastic process can not be integrated locally since it's random at any increment size."

Assume that you are holding to the expiration and can ignore P&L prior to expiration. Also, assume that you are doing it on S&P index where you have futures with round-the-clock liquidity. PS. Personally, I thought this was a good iterview question. It requires some knowledge of options...

You mean you suggested the strategy or suggested to interview people over a drink? The latter one is a good idea, people are much easier to read when they are drunk :)

In this particular case, one trader sold a naked 22-strike call to a market maker, who hedged delta in vix futures. If the market-maker continued delta-hedging on daily basis, he would have locked-in higher realized volatility then the implied he paid to the original trader. From the sellers...

Well, you give a description and ask "why would this not work" :) In the dark times (1998) I had a guy from Bankers Trust ask me this over a drink.