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I usually use short-term T-bill rate, but it's not really important these days given that all short rates are, for practical purposes, zero. In fact, when looking at Sharpe of a derivatives strategy, you might as well use nothing at all since you are earning o/n interest on your margin deposits.

There is no "probability" to talk about here, I am not suggesting taking more market risk and competing for alpha with the big boys. Instead, I actually mean steadily producing these kinds of returns (with Sharpe of over 2) by locating statistical and mis-pricing opportunities. It does take a...

I have not looked at smaller ETF dispersion for a while, might still be there; Overall, the idea is to find small, illiquid stocks or ETFs that have options and try to see if there is any sort statistical opportunities there, I will send you a PM with a few examples. Smart thinking. Options on...

I disagree. You can easily make 50%-80% on 200k if you have the right tools and the right knowledge. It's relatively easy to make very nice returns on small amount of capital, capacity constrained opportunities abound in the market. Of course, you also have to spend the required time to find...

People on ET get offended over all sort of things. The article, however, is crap, in the least because any "X things that are Blah" articles are crap to begin with. In addition, this article that is written to sell a book which makes it even more crap. Especially since this is a...

if you would be short puts on any Japanese stocks in the spring of 2010, you'd be toast. Of course, you would later claim here that the stocks actually where on your "watch list". You are a special kind of idiot, we are truly privileged to interact with you :)

Every sane person would look at risk control before initiating the trades, not when the shit hits the fan (see my Nth rant about "adjustments"). Problem is that no matter how good your market intelligence is you can't protect yourself from fraud or a natural disaster. If you where short a put on...

This is a load of crap designed to sell this assholes book to wannabe rich. Rich people, just like poor people, are a diverse bunch and they think in a number of ways. An owner of a laundromat chain has little in common with a hedge fund manager, neither in terms mentality nor everyday interest.

All right, people, in response to a few private messages (I have replied, mostly), here is a public announcement. There is no miracle strategy out there that you can trade without understanding the pricing or the risks. You can't just "sell premium for a living" or do "iron fuck-knows-what" and...

Appreciate the candor. I think this also might be the difference between quantitative and discretionary traders - once your decision-making is outsourced to the back-testing/statistical process, your emotional state has far less bearing on your results.

Care to prove me wrong or shall we agree to disagree?

What exactly am I hallucinating about? In the few placed I've traded at, I have seen people with problems going beyond simply not being "emotionally grounded", people with real psychiatric illnesses (bipolar disorders, clinical depressions, even schizophrenia) who still managed to have very...

Someone who rationalizes anything away is not using his critical thinking skills, that's by definition. Critical thinking assumes impartial reasoning based on facts, a consilio. Also, I do not see how being "emotionally grounded" prevents anyone from making mistakes in numerical analysis or...

People who have blown up (including quants at LTCM, which is a fashionable topic) have exhibited either some sort of fallacy in their numerical analysis or in their critical thinking. Dumb luck and access notwithstanding (which pretty much excludes all market makers), people who were and are...

If you are using critical thinking skills properly, you would naturally avoid all of the behavioral traps anyway and emotions would not come into play. Of course, in addition to just critical thinking, understanding the numerical aspect of the business is just as important. If you have both of...

Yeah, yet another waste of an effort - nobody really trades full strips that much anyway, usually people trade lower strikes or ATM against their var swap positions. I think they should have concentrated on giving exchange MMs an incentive to trade their variance futures instead.

Oh, it's on and going along, but it's going to be for internal use by the fund...

It's either a slow bleed or a bullet to the head. Welcome to volatility trading! :D

SPX, of course - either SPYs or ES futures.

I hear stories that Infobright is the way to go for dealing with financial data on the cheap. It is a column-oriented database, with a scalable cost solution ( "Community" edition is free, "Enterprize" edition is not). As a bonus, all of the tools for MySQL work with it and you don't have to...