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No, initial strike is specified by the exchange using a variance calculation, I think (have not looked) it would be with 19 handle edit - yes, initial strike is printed as 396.41, so square root of that is 19.9. i'll get to how these things are quoted in the next post. For now, think that...

You are right, for some reason (formating?) it deleted my square rooting (lets see - ^2). Thank you for pointing out! Can a moderator correct this please, it's been too long? PS. I also see that a multiplier is missing from my variance P&L calculation, but that I think is my error.

Do you think this thread actually belongs in Index futures or somewhere else? Would it get better visibility there?

So, to continue about variance. Where does variance come from? Well, thats easy too. Fair variance strike is determined almost exactly the same way as the level of VIX - it is an average of out of the money puts and call. The weights are determined by the strike step divided by the square of...

The "atm vs var" switches trade fairly liquidity in the OTC broker market. The usual way is to trade them Vega neutral - so you trade vega notional of the variance swap equal to the SPX vega. In case of futures, you would want to take the variance units and back out the vega notional given the...

Lets start at what is a variance swap and how is it "GOOD". Variance is a square of volatility. Historical variance can be calculated from daily closes using the following formula: 252 * Sum( 1 to N) { log(SPX[t]/SPX[t-1])/(N-1) So, it's just an average of daily logarithmic returns...

So, here they are. There is little volume there, but I already hear that hedgies want to get crossed on the exchange instead of OTC and there are two or three active market makers. VA–S&P 500 Variance Futures I will admit that this is pretty awesome. For all of us who who get our jollies...

Out of curiosity, does MSN have some sort of API or you are webscraping?

Real life drift will usually have very little representation in options, in a very indirect form only, such as change in borrow (an asset with an obvious downtrend is usually a popular short) and skew (since it is a popular short, again).

These two have been bothering me for a while - can HFT delta hedging capture bid/ask spread on cash and can it properly capture the higher frequency M/R that is known to occur. If the HF spread/MR can be caught, given the fair number of HFT players in options, it has to be at least partially...

We got ours equity data from the PB, they were pretty nice about it. An alternative is to strip them from the options market, if these are optionable stocks.

What exactly would you find "useful", may I ask? The basics are as simple as they get, you rebalance your delta and lock in the gamma gains or losses, while bleeding/collecting theta. The really meaty stuff starts once you get into details: (a) which vol to use for hedging (generating the delta...

I don't really see how poverty/wealth has anything to do with success. Some kid in Bhutan might know way more about trading vol then I do and yet he's running a 10k account simply because that's all he has access too. PS. I used to ride a bicycle to work, does that make me a failure?

Yeah, was a little bit of a layoff trade :)

Positive PnL day yesterday - I found a dollar bill on the corner of 87th x Lexington while walking my dog. Seriously, do you believe that anyone who works for an institution or runs a fund would post his trades or actual PnL on an open forum?

Someone who was dumb enough to show electronic markets in single name exotics deserves to get spanked. That was plain stupid. I did not even know Oanda was trying to establish themselves in the vol business. PS. Btw, an interesting detail - betonmakets limits the leverage on all no-touches...

It depends on what you are trying to achieve. There is a variety of ways you can get long Vega convexity (vomma, that is) for "free". You can put it on via a term structure position (e.g. you get long an ATM calendar and sell an OTM calendar at higher vol) or a skew position (for example, a...

That there is no "core values" that contribute to success in trading - it's a profession, albeit with a little more decay in the skill set then your average carpenter.

Oh, I never thought you did, but you have to admit that the quote is a classic.

I had a bunch of cartoons drawn up about option greeks, delta hedging, various dynamics and trading strategies. Nothing complex, but in pictures instead of math formulas. My junior trader at [now a dead firm] called it "The Volatility Porn" - I will try to dig it up.