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Exactly. This is an awesome interview question!

Simple. I would guess your software produces implied vols in calendar days :)

Many things might eventually kill me. This job might kill me eventually too. I am an institutional PM so we play in different sandboxes. Nor do I harbor any jealousy, it’s great that you have figured out a way to make a buck. However, it’s very upsetting that your way involves preying on people...

Yeah. I should be buying NY Lottery tickets - some guy won a hundred million last year. PS. The fact that you are not willing to seriously address the questions regarding the conflict of interest is pretty telling

Let’s consider this without weighing in on the merits of the strategy. I understand and still do event trading (and I know this alpha very well too), but the ethical aspect is more interesting here. No matter how you present it, there is an obvious conflict of interest. The crux is the...

I live in the New York City. We don't do "thank you" here :) PS. it's all good

You also say "thank you" a lot. Very annoying :) PS. anything I don't know I always ask questions - you should never be ashamed of your ignorance and you never know, maybe that one particular answer will be the missing piece of the puzzle

I think without physical delivery this will be a still-born product, like many other recent “exchange innovations”. Unless, of course, some 3rd party steps in to provide a liquid EFP market.

Ok, there is a hodge-podge of claims here. Let's take them one by one: * What you are saying is that the markets are efficient and the prices reflect the upcoming earnings. This might be true in theory, but not in reality. No, I do not claim that the market predicts each particular earnings...

It's not the models that have changed, it's the flows that drive the markets have been altered by these new instruments. For example, in the markets where volatility flows are dominated by exotic derivatives like autocallable notes, you will see a bizarre propensity for implied volatility to be...

That's not necessarily true. Your PnL will be path dependent based on the direction on the moves and your hedging. That's true even if the stock has realized higher than ambient implied (the whole premise of "free gamma before earnings"). If you are stating that you are making most of the money...

LOL. My first lesson in arbitrage, risk and risk management was based on gambling. To make the long story short, back in college I tried to arb two football bookies (different dormitories) against each other only to have one of them default when I tried to close the arb.

Well, apparently, Wikipedia defines: Gambling is the wagering of money or something of value on an event with an uncertain outcome with the primary intent of winning money or material goods To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some...

Could you explain this particular cultural reference?

* beware that this was pre-exotics, pre-VIX-futures and pre-var-swap paper so most of the driving flows did not exist * it's all written from the perspective of local vol modeling which is does not reproduce real life very well * anything ED writes is worth reading, no matter how dated

Yes, in absence of anything special (like forced vol flows) that's what happens most of the time. On big moves it's all over the place - when the ATM is really high, skew will flatten sometimes. When there is a big rapid rally, sometimes vol moves up.

You obviously come from CTA background - any equity or derivatives quant has stumbled onto strategies like that and moved on with a sigh :) There are plenty such strategies. Usually it would be something that's (a) is capacity constrained and either (b) is high touch enough that it can not be...

Actually, the rule of thumb is very reasonable. Here is how dynamics look more or less:

Hmm. When you say "we have been doing it" do you mean that you actually transacting or that you have been paper-trading it at mid? You are paying a round trip in terms of transaction costs, you are delta neutral and your holding period is fairly small. To benefit, the earnings move has to be...

UK is an emerging market in my book :P