Search results

I am not sure, to be honest, I need to think about your analogy a bit. Best way to think of it is that once you introduce multiple strikes, your are going to be mainly accruing the implied/realized difference for the strike you are closest to at the moment.

I want to avoid that, it would be yet another software package to maintain and optimize. The access is non-random, I had my junior do that and he ran into some sort of issues, but i think it had to do with him trying to delete that directory. I guess I have to do it on my own :)

Right now it's all running on Linux under ext4, supposedly a very fast file system. I just looked at SSDs and they are suprisingly cheap (about a $1/GB up to 500GB or so), so that might be the way to go. The EOD option data is only 110 GB so I can put it onto a dedicated drive and the problem is...

Because your delta-hedged P&L is the change of underlying weighted by the gamma on any given day. At the inception, long gamma from the ATM option dominates your P&L, while as the underlying is moving toward the other strike, at some point short gamma from the wing will be dominant.

Here is a simple version. Let's say you have two options, one is with the strike of 100% and IV of 20%, the other one is struck at 90% and has IV of 23%. So that's a skew of 3% which means that the market expects that if the underlying goes from 100% to 90% over the life of these options, it's...

Up until now I've only worked with historical data for small set of underlying assets, mostly indices. Right now I am storing them in the file-system based hierarchy - a directory for each symbol where there is a sub-directory for option chain and a sub-directory for volatility surfaces. An...

Of course the answer is 'NO' - P&L for a delta hedged option position is inherently stochastic. Even if you have predicted the realized volatility correctly, the path dependent nature of the beast can make it a losing trade, more so in a risk reversal where you have multiple strikes. I just...

My experience is that "intellectual property" in quantitative trading is worth very little, since everyone is doing more or less the same stuff. You should also reasonably expect that your strategy will decay as time goes on and so will the value of your intellectual property. The more...

I will clarify right away that I am talking about return on capital, not absolute P&L. From the absolute P&L perspective, the best bet is to be running the most capital you can get your hands on - it maximizes your traders option. If you running a few yards under 2/20 model, you don't need alpha...

Oh, I see. However, I don't think you can replicate a VIX futures statically using vanilla options - "getting rid of square root" does not get rid of the convexity adjustment and the associated vol of vol component.

I was talking about a naked gamma position which would be a view on pure realized volatility. A calendar spread (I can't see how you ratio it, root-time vega flat I presume) would naturally have less margin requirement for the same amount of vega, but it would also be a very different position...

Sorry if I've offended you - I was merely surprised since I can't remember that kind of lack of liquidity in 07, especially in index.

Well, I am sure some days you will regret it. CBOE should make an index (rolling straddles plus delta hedge at close) and some dude should issue an ETF. Overall it's not that different from VXX :)

Yes, which is not capital efficient at all. For example, to short $1000 worth of vega in 1 month ATM option you would need approximately 850k of notional. If you use reg-T margin, your capital requirement is like 250k day one (approximately - i think it all boils down to about 30% of notional as...

I think people understood that they are selling convexity but could not find anything to do. It is a pretty frequent occurrence - people can't find anything worth doing, but have to do something so they throw shit at the wall and see if it sticks. Most times it sticks, but sometimes it falls on...

Yes, 08 was a real pigfuck for some people and a real happy time for other. All sort of convexity effects that nobody except for me cared about suddenly became interesting - e.g. that variance swap positions are convex in vega (who knew!:)), that vol swaps and variance swaps are not exactly the...

If you could fund better then LIBOR in 09, you did not need to do boxes :) Sent you a PM.

Personally, I'd feel that it's exactly the opposite. The bigger is the capacity, the less of an alpha and more of a beta trade it becomes. There are edges out there that exist for decades simply because of capacity constraints and are simply waiting for someone to harvest them. If anything...

I was running an index options book at a large bank at the time and don't seem to recall anything that extreme, unless you were running really large or long-dated positions. What do you mean by "get $10 over fair value"? Were you long or short gamma? What prevented you to from covering with...

(a) I have not used this particular vendor, but I am sure they are offering the same thing as most cheap vendors, which is OPRA EOD data. (b) If you are after a cheap source of option prices, it's ok, but if you need reliable implied volatilities, they would be very off and you going to have...