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@El OchoCinco - the article is wrong I think. I am pretty sure he was a seller of the put on the original trade and rolled it the same way. As far as I can remember, the original trade was done for a small credit but he must have paid something to roll it. Two interesting data points - this is...

- if I recall correctly, he was a seller of the 12 puts (sell 12P buy 15/25 1x2) - when he rolled the trade, it was 50ish delta and it’s kinda same delta now - 250k puts is 25k futures when we get below the put strike so that’s a meaningful fraction of DV if the option is pinned - without a pin...

The time/volatility incentive is an interesting hypothesis. To summarize, you’re equating uncertainty with stress (a reasonable thought). It’s perfectly sensible to maximize the current payoff if the future payouts are less probable.

I think you are conflating a spread position with a hedged position. The key difference is that a hedge is executed with an express purpose of reducing variance on the trade without changing the expected value. Hedge in itself has no alpha and, in fact, should be viewed as a cost. It's not...

I assume it’s sell-side IDB? My dated experience it’s per notional usually, with some bookies charging per-vega on longer dated stuff like 10y10y and per notional on shorter dates. Some would try to switch it mid-trade :)

I could see that. I guess in addition to the costs, hedging reduces capital efficiency.

How do I demonstrate otherwise? :confused:

It's run of the mill stress. In this case, they probably expose the poor animal to bright light (cause they like it dark). They specifically say that they are able to reproduce this effect by electrically stimulating specific parts of the brain for a while. I wonder if it's possible to do a...

If your hedge is costless, the decision comes down to simply thinking that for the same variance I can take a bigger position in my alpha asset and thus make more money. In an real world, it's a decision where you are weighing the cost of the hedge against the expected reduction in variance.

Hmm. There is no right answer obviously, but I think profit per trade value might be a more important metric in some sense. Your t-stat, which is a product of Sharpe and the square root of number of trades is important to determine if the alpha is real but for strategy selection you might care...

What are we talking about here? Did I miss something interesting?

Dude, did you even read the abstract? It's not a psychology study and it's not people, to start with. In a sense that you need to risk it all and save yourself? The way the risk and payoff are defined in this particular case, it's chocolate-ness of milk (reward) and brightness of light (risk)...

Well, "rational" from evolutionary perspective, driven by the times when any risk you took could be your last. It's not clear if it's economically rational at this stage of the game. PS. I was impressed by the animal model. Feels like I'd want to do some sort of study for similar behavior in...

Just came across this in Cell: http://www.cell.com/cell/fulltext/S0092-8674(17)31239-4 Besides a few interesting neuroscience ideas (I am still working through them), behavioral conclusions were as follows: (a) chronic stress decreases ability for proper cost-benefit analysis (b) it increases...

I had a colleague at Morgan Stanley who did his PhD at the Moscow State University. He told me an amusing story, very apropos in my opinion. It's a prestigious school and it's very hard to get into. In Russia, as one can imagine, this leads to various forms of corruption and hustling. At some...

So, to finish up with a bit of harassment :) By chance, I had dinner with an old friend who knows a fair bit about the whole trade advisory thing and many other retail-oriented services. He deals with it for a living in an enforcement capacity. We had some wine and I got a complete "download"...

What are you trying to achieve? Match broad market exposure (an index fund will do it for you much easier)? Do you have specific factors you are trying to be exposed to? Do you have a volatility profile in mind? These sound like a couple of very arbitrary numbers. People spend a lot of time...

In some things, these firms are going to be providing the required risk premium. In some, they would (and definitely do) align themselves with other larger industry players. There is such an abundance of opportunities in that space and new ones are being “built” as we speak. One of the ways...

First one is similar to what truetype said. Let’s say you find some cross-sectional alpha in a set of 500 mid-cap stocks. In general, you will see that equal weighted performance is much better than liquidity weighted performance. So it would be attractive to a guy trying to deploy a million...