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Let's extend this. How about "Whoever believes BS delta is a usable hedge rato is probably an idiot"?

all i said was (and will be happy to say it again) is that you would be perfectly ok to use asb(delta) of a vanilla as an approximate price for a digital which is, in fact, markets view on ITM probability. this is, as previously noted, because in beign cases dP/dS is very close to dP/dK...

this is a meaningless statement since it's clear that one would ignore the sign when applied to probabilities. in any case, as any experienced exotics book runner (e.g. myself) would tell you (assuming that your rates and volatilities are relatively low and maturity is reasonably close), price...

yup, 100% in the money - your worst case is a zero payoff. what would you say a zero strike put on Lehman was worth? :) if you start talking about value of the firm, it's (a) not BS and (b) not 100% delta at zero equity strike i am trying to understand - are you denying that in a pure B/S...

well, the futures contract is in essense a call with a zero strike... so guess what - yes, it does have a 100% of finishing in the money

Buying options ahead of the earning call might not be a bad strategy, especially if you have reasons to believe that you going to get some realisation out of it. I actually have a screen that does exactly that - looks for stocks that are possible movers vs what's implied by the vols ahead of the...

For what it's worth, I have a couple strategies that are long gamma only, but in single stock options. The idea is to use a plethora of information to identify stocks that might move a lot, either during the earnings season or based on some semi-fundamental reasons.

yup, january effect :)

Really? Do you really believe that an average corporate desk can cover the risk in the same bond they've just bought/sold so they don't need to know their duration risk? Also, you do realize that most desks that make markets in corp orates also make markets in the respective CDS?

A bit of it is balance sheet costs, actually. If you look, Qs and IWM vols are a bit higher then their respective indices.

Before we get into the whole "how long and how much" thing, you gotta realize that there are two separate types of MMs - there are automated market maker and institutional market makers. The differences between these two models are huge and, for practical purposes, these are different...

On a totally different note, how do you guys like living there? Feels to me like it's a perfect country for retirement - good weather, good food, low cost of living, good rock climbing (important for me), accessible women (important for some) etc. My buddy just retired in Phucket - I am...

That is always true. I think frequently the idea is to take someone who is not experienced, but smart and watch them developing alongside with you. Also, a rookie would not mind doing some scat work that a senior person would balk at.

The concept is good - a teacher gets paid well if he achieves good results. A meritocracy, finally! The devil is in the details - how does one quantify the effectiveness of teaching. I guess if all of the students took some sort of standardized tests every year, it would be possible to take...

I guess that the same thing I meant. Trying to maximize the pleasure without thinking of the potential consequences.

I disagree. Theta is THE key Greek in identifying what risks you have in the book. In fact, the best way to identifying if you are long risk or short risk (assuming a large delta-neutral book) is to look at your headline theta. I think the wrong thing a lot of these people do is to...

So, in short, the "adjustment" strategy is to add to a losing position and hope for mean reversion?

Yeah, my hindsight book is doing great too...

What is so magical about being a market-maker on the exchange floor? If anything, I would be reluctant to get any sort of instruction from a guy who has positive transaction costs and can frontrun the flow. How exactly does the fact that the guy is good at ripping peoples faces off make him a...

Yeah, exactly. You can have a strategy with high returns, you can have a safe strategy and you can have a scalable strategy. Unfortunately, you have to select two out of these three.