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It's a truism. Any industry exists to enrich the business owners. However, if I were to ask you "what is the reason for existence of the tabloid press?" your answer surely would not be "to sell newspapers and generate cash". The question O/P is asking is a good one - "what is the...

Price discovery is one of the major functions of the "trading" industry and it can only occur in an active, liquid market. One of the reasons why modern economic crises take much less time to resolve is because of the presence of active markets that are ready to express opinion on the economy in...

Comparing IV(a) - RV(a) <> Beta(a, b) * (IV(b) - RV(b)) is not the same thing as comparing IV(a)/RV(a) <> IV(b)/RV(b)

Best way to select a benchmark asset (e.g. SPX) and measure beta-adjusted risk premium. Works for me.

That is because PhD in mathematics has a number of prerequisites and barriers to entry. Conversely, any idiot with a few dollars can open an Interactive Brokers account and call himself a trader. If you look at success rates for undergraduate level recruits to top investment banks or funds...

Actually, you're totally right. It's good to have people like you in the market - you put bread on my table. Keep up the good work. PS. Really, you saw thousands of options traders?

Pure beta-neutral vol people are pretty rare, as it requires a confluence of skills and experience that is rather unusual. Most people have a math or science background combined with many years of option-trading experience in large institutions. In general, their returns are very similar in...

Are you asking "why trade volatility?" or "how to trade volatility in a non-directional manner?" The first one is obvious - in trading volatility, you could come up with a stream of alpha that other people might be missing and/or leaving untapped. The second one is less obvious and...

That's the point of hedging - you don't make as much, but you also don't lose as much when things go against you. bwolinsky was definitely here How is that? Please, enlighten us!

Are you bwolinskys buddy? Seems like you both belong in that special thread...

VIX calls or call spreads would work with any diverse enough book in case of a meltdown. Which, all in all, what you probably want - you might like selling idiosyncratic risk premia of various stocks, but not necessarily want to be caught short convexity in a market-wide sell-off. The proper...

yep. is your PM working yet - it would be interesting to compare the statistical methods we are using

Not true. In general, "pure" options traders trade volatility, which can either be a true directional bet (e.g. if you are long vega, you are short the market) or could be truly market neutral (e.g. a collar skew position is a bet on volatility dynamics with respect to spot and not much else)...

The reason everyone re-normalizes the skew for root-time is to bring the term structure of skew into the same basis. My advice, in general, is NOT to think about the skew as an indicator of the actual implied distribution, but rather as an indicator of the expected volatility dynamics with...

Are you talking about same constant tenor or same maturity? Also, the series above would be unstable by definition. What you probably want is either in root-time moneyness space (most people use 10% sitrke spread): SK10 = [IV(90%) - IV(100%)] * sqrt(t) or skew in distributional space SKEW =...

This is not even remotely true (and I can tell this as a fellow math PhD). An average mathematician would not even know where to start and, more importantly, where to stop. To quote from myself, "the most sensetive market model is your own spanked bottom" and it takes years and years to...

Main source of P&L in skew trades is usually the actual change in implied volatility when underlying moves over to the new level. I will send you a PM, don't want to clutter this space. If you see skew correlated with volatility, you are not measuring it correctly. Let me guess - are you...

Well, the choices are (a) trade a risk reversal (a collar plus delta) or (b) trade a ratio spread (e.g 1x2 put spread in vega-neutral ratios). The real question is "are you sure you are predicting something that is useful?".

All right, dude. Why don't you go back to the vanity thread while adults here are talking about real life, such as trading skew? I am sure people here are starting to get tired of the whole "I know it all act".

For what it's worth, I know people that have very small funds and do trade Japan/Korea/HK equity options, but they do it via some sort of offshore master entity. In general, to do anything serious globally, your best bet is not to be domiciled in the US (opens a whole bunch of other problems...