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Variance swaps is a very liquid market, key maturities trade in size daily so you can always gauge if VIX futures are rich or cheap vs the variance swap market. In general, levels for were var swaps trade in the market are a touch above (right now about 50bps for Dec12) where the theoretical...

Well, VIX index is just a mangled-up calculation of fair variance strike (not fair value) of a 30 calendar day variance swap. So not, no variance swaps have to trade in the market of the VIX index to be calculated. The fair value of VIX futures does have to do with where variance swaps are...

I think you need to understand (in order of importance) (a) what a variance swap is and how to replicate it (and yes, it works, the jump component on SPX is relatively small) (b) what forward variance swap is and how it can be linearly replicated via spot-starting variance swaps (c) what is...

Actually, there is a fair number of reliable statistical studies you can do to detect short-date opportunities (not really intra-day, but e.g. pre-expiration or pre-event). The key difference is not to get hung up on a small subset of names, but scan across a large universe of stocks.

but that someone else is not nessesarily your counterparty...

Oh yeah, for sure. Assuming a regular log-normal model for the underlying, here is a quickie model: etf return = spot return^leverage * exp(drift term) drift term = (1-leverage)*rate*time - (borrow + management fees) * time - 0.5 *(leverage^2 - leverage) * variance * time You can easily solve...

This thing is pretty big - the index positions (overall across the market) grew like 45% since January (about 145 yards in notional now). I would guess 20-25 of the long are in the hands of JPM. This does smell a bit like the great MS "short housing" trade, with the whole "direct link to the...

Carry on a position like this would consist mainly of the borrow cost. On reverse/levered ETFs the borrow is significant.

The answer is both "yes" and "no". There is a whole bunch of statistical studies you could do, depending on what you are trying to achieve.

Dude, it's just a matter of backing it out of the formula for delta: delta(call) = exp(-rf*Time) * pnorm(d1v) delta(put) = exp(-rf*Time) * pnorm(d1v) - 1 d1 = (log(spot/strike)+(rf+(sigma^2)/2)*Time)/(sigma*sqrt(Time)) so, solve for d1 first: d1(call) = qnorm(delta/exp(-rf*Time)) d1(put)...

I would seriously question ability of NSA to break PGP (which is the crypto that most paranoid people use). Perhaps the NSA has found a polynomial-time (read: fast) factoring algorithm but I seriously doubt it.

Actually, the idea has been kicking around since the late 19th century. Compressed air engines have been used in a variety of applications, for example, in early torpedoes. My prediction would be that this car will go the same way as every other compressed air propulsion system - nowhere. There...

Ability to figure out if your trading pattern or trade history are real or statistically spurious is the key to this game. Personally, I think that it all boils down to two aspects - number of variables in the system and fundamental explanation for the behavior you are exploiting. Not true. In...

What exactly did he describe? That the clients are called "muppets"? ER doctors call old people "GOMER"s, homeless people "SHPOS"s and many other things. Is it that the firm is trying to make money off their clients? Show me someone who is not, in any industry. His clients are most probably were...

As long as they are not doing anything illegal, it's my loss and their gain - nobody is forcing me to do business with them. Smart clients put 4-5 banks in competition and get good pricing. Also, smart clients never listen to any ideas that salespeople put in front of them - in fact, through my...

The guy was in charge of selling US equity derivatives to EMEA clients. So the whole "advisory" role is a big bowl of bullshit. If you are trying to buy an appartment or to buy a car, do you think the salesman/agent has your best interests in mind? I am sure it happends in any profession where...

Here are the facts. The company is there to make MONEY, not to please old ladies. Most of the IB revenue comes from trading and by defenition, you are going to trade AGAINST the clients to make money, not for them. I don't get it. What are the breaking news? What exactly did Mr. Smith...

I am not complaining, I am just stating the reality - the more you make the more you end up spending. While the carry cost for my dogs might come across as "extravagant", there are people who are spending way more on a similar income and there are people who own more consumer goods with incomes...

GB: see, here, i buy gold coins so when the shit hits the fan, I'd be able to buy ammo for my guns and canned food!! ME: you know, it would be way cheaper to actually buy ammo and canned food now and store it some place safe...

So, long strangle plus a short strangle at farther strikes is a condor... I honestly don't see a point of this trade, especially at 90% confidence.... ps. atticus beat me to it