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Not true. Exotics do tend to isolate specific risks and you can frequently find something that has higher statistical edge then regular options. For example, up-and-out calls have been statistically advantageous, especially if you have the right screening approach.

It's an interesting question. As an ex-MM I feel that you actually do start with volatility and time as the inputs, not with the option prices. In the end, obviously, supply/demand establishes an equilibrium, but the initial market is established as a function of the market-makers opinion of the...

What makes you think you can even use the same volatility (and apparently, the same model :D ) for the compound options? Even if you disregard the modelling aspects (e.g. critical stock price), you should at least assume that realized volatility of an option is going to be a combination of...

I just came back from the Central Park with my dogs, it's chilly but no rain so far. Gonna have some bourbon right now and contemplate the weather. Everyone I know is going to work from home tomorrow, my guys are not an exception.

Could you define "much cheaper" and define what exactly you mean by options on options (do you have a payoff in mind)? The ones you refer to (calls on calls, for example) were marketed by big firms for big firms and still were not very popular. Barriers (up/out or down/out) are far more...

Well, it's easier for me, since I am a permanent resident but not a citizen. A green card is easy enough to give up. While there are some tangible benefits to the US citizenship, they diminish significantly once you reach a certain level of income or net worth. You don't even have to live in a...

You used to be able to get them OTC, but they were expensive and not very popular (I'd know best, given that I used to make markets in that sh*t). And obviously there is no added leverage effect given the cost, you just as well might trade options farther OTM.

You can't make a blanket statement that all of our success is driven by luck. Similarly, you can't claim that all of it is due to hard work and dedication. The reality is that success is a hybrid result of work and luck, with work being the main driver that gets you 99% of the way (one can make...

It must be the Jews, as usual!

two variance swaps with daily and weekly fixing frequency respectively

Selling risk premium is not at edge :p not that there is anything wrong with it.

No, because it's not free money - in a sustained move (a la last August) you get hurt holding daily over weekly variance.

Daily and weekly are be about a vol off (daily over) or about 3-5% of daily vol level. If you don't have to do any work to collect this money, it's not a bad deal - e.g. trade weekly variance against daily variance (long daily). The trade-off is that sometimes you have consistent volatile...

No, I do mean that you should be getting lower annualized volatility numbers for weekly volatility then for daily. See attached spreadsheet for an example, in this case S&P 500. PS. can't seem to attach an excel file

I would certainly hope that you get different vol for different periods - e.g. you should be getting lower volatility weekly then daily. At the limit, think of tick-level volatility - as the price bounces between the bid/ask, your volatility would be much higher then daily.

You seem to be pretty bitter about outsourcing. Is there a reason for it? Personally, my experience is that programmers in other countries are just as bad (or good, depending on your point of view) as their American counterparts. The ones with good education and good critical skills are good...

Which of the cheaper feeds include option data? I am thinking of using a backup provider, e.g. ActiveTick given that it's so cheap, but could not establish if they provide equity/index option quotes.

Sorry, why not? If you think forward vol is cheap...

"park avenue" was the user, I recall

Yes, OPM is getting harder and harder by day. The allocators are consolidating and that drives money to bigger funds. The seeders are looking for extended track record or supreme pedigree (pedigree seems to rule - in fact, a senior manager can probably raise more then a hands on trader with a...