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There is more to market-making then making markets to retail punters PMM-style. I just resigned from making markets for a large IB and our platform was a variation on Murex. So, yeah, you can and people do. I would even venture as far as to say that internal platforms at most places are actually...

The reality, of course, is that most volarb funds do not use any of these platforms, these are mainly for AMM-style guys.

Yeah, except you are short gamma in the pre-news period and it can certainly get pretty painful (a whisper-number can totally destroy you). To add insult to the injury, changes are that you have already paid extra premium for post-announcement vol.

If you are delta-hedging, you can lose more then the premium differential. If you are "adjusting", you can obviously lose more too (grownup don't do that, but for some reason there is a myth floating around ET that you can "adjust" your way out of losses).

VSTOXX

I hear conflicting stories - on one hand, seems like people want to pick up some cheap protection. On the other hand, I hear of some large(r) guys getting squeezed out of short-risk trades. PS. My P/A trade has been (since early this year) to be short Spooz Dec 1500 calls... Every structured...

Very interesting. I am in process of picking a broker for my IRA (our PB is a big and ugly bank with the minimum account size above my measly IRA) so I would love to hear what people got to say.

I think someone posted an options-specific matrix that was comparing various retail brokers. My recollection is that IB came out on top, but that was using default fees (frequently, you can manage to negotiate better fees away from IB). Simply by looking at their site, their fees look pretty...

You want to do it in short-dated options - this would avoid Vega risk. The beauty of trading pairs using options is mostly in the fact that you can take into account the directionality of the move. For example, if you think that in a rally stock A will outperform stock B, you can buy calls on A...

"I've seen excitement, and I've seen boredom. And boredom was best." --Terry Pratchett

If you are truly able to predict the level of VIX or even changes in the level of VIX, your best bet is to trade something delta-one, either S&P or maybe a VIX ETN. It is going to be pretty hard to play changes in variance (which is what VIX is) in options, unless you are willing to trade a wide...

Yeah, I hear you. It just might be my personal bias against negative skewness, since many strategies in my space show a very high percentage of winners to losers, but when you lose, you lose big (and liquidity disappears so stops might not help). I guess in a linear product space it's not as...

Change in demand for options is a sufficient, but not a necessary condition for changes in the level of VIX. Most of the time, changes in VIX are simply due to the delta to S&P. Now, why does VIX have any delta, if it's measuring volatility? Well, VIX is nothing more then a weighted average...

It does, thank you. I can't disagree or agree, since I really have no opinion on the underlying assumption, I was just puzzled by the idea of having large gaps as good (I don't buy the Oraclewizard explanation at all). I am sure you test for all sort of N-th worst/best losing streak, N-th...

Out of curiosity, why would you deliberately design a strategy to have negatively skewed return distribution, even if the mean is positive?

Actually, it's not a bad question. VIX is the "expected" volatility of S&P 500 as formalized by the fair variance strike. Whatever the replication argument (too much to get into here), this means that it takes into account implied volatilities of options across all strikes. Thus, majority of...

Well, to confuse things further, there is no hard threshold on the Sharpe ratio either. It's more of a judgment call - how leveraged are you willing to be with your own cash on this set of strategies? Also, try to think of the infrastructure costs - do you need to be managing 100m to offset the...

It all depends on your trading style (frequency, asset class, level of automation), on your own experience and on your eventual goals. First of all, fund raising is a game that you should hire a professional for. There are guys other there that would bring in cash for a split of the AUM fee and...

It's not like R has anything that can be used to market-making either (nor do any commercial packages actually calculate greeks well enough to be included in the AMM process), but the Rmetrics stuff is usually good enough for simple portfolio management.

Just to complete the picture. There are also first-loss capital providers and capacity-prioritized seeders that you might want to consider. The first-loss guys will give you leverage (e.g. 1:10 with a 50:50 split), but you are a first-loss recipient (personally, I would just think of it as...