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Ok, sure, since I am bored stiff at the moment. Lets take a leveraged etf L with a leverage ratio of beta and model it's relationship with the underlying index returns. To start, assume that underlying index is following a brownian motion process: dS/S = vol * dW + m*dt where W is Wiener...

You can show mathematically that a leveraged ETF is short convexity and locks-in losses by daily rebalancing. The borrow rate on these products reflects it fairly well, so don't expect any miracles.

Well, not always, as I have had people working for me that were from all sorts of second-tier schools. I'd say landing an institutional job is part luck (high-end education included), part social skills (being a pretty girl helps too) and part drive. You might get away with two of the three if...

To add to that idea. For a smaller player (retail or micro-institutional), trading in off hours is a great way to make money by being a liquidity provider.

You keep using that word. I do not think it means what you think it means. The "edge" is a structural advantage of some sort. A market maker has an edge in knowing the flow. A corporate derivatives trader has a balance sheet and access to deals. Those are "edges". Risk management is not an edge...

Understanding at the base level does not imply an ability to replicate, even with appropriate experience. E.g. partners in a fund wouldn't (and should not) be able to replicate a strategy after a PM explains it to them, but they certainly understand the logic and the risks. PS. Anyway, my...

I used to date a lady who was essentially a neurosurgeon (she was a pediatric invasive neuroradiologist, to be exact) and when I'd ask he "how did your day go?" she was able to explain what exactly she did and why. A truly competent professional should be able to explain his actions and thought...

Actually, it's a very tricky question (which makes me think most people suggesting to read a book did not give it much thought). Many different trains of thought depending on what trade you are putting on. In the end, it's about comparing risk and reward broken down into risk factors of your...

Well, skew means that people are more interested in owning optionality in one direction then the other. you can interpret it in a variety of ways, to name a few: 1. people expect the terminal distribution to be skewed 2. people expect more volatility in one direction then the other 3. people are...

How's the super-trader doing the past few days? he's been eerily quiet...

You are buying correlation premium (the opposite of dispersion) and your strategy most probably has negative expected value unless you apply some other filters.

In general, people talk in terms of multiples of ADV. Once you hit 10+ percent of ADV, it is in general considered that you can't execute in a single day, though you can accumulate over time or get a block quote. PS. Volatility of the stock matters too. When the block desks come up with block...

Interesting subject. IMHO, price-level back-testing is kinda misleading for options. You going to arrive at the usual "easy to make money by selling premium" kind of thing. At the very least, you should work out a way to separate underlying dynamics from the option pricing component (i.e...

Out of curiosity, you really don't feel like your alpha will run out at some point?

When you say "worth 500m$" what are you measuring? I hope its average revenue and you are the primary PM :) I have been doing this shit for some years, last few jobs in fairly senior roles. "Top" IBs and high AUM funds. Currently I am a primary PM at a fund. Anyway, I have enough perspective...

In case of a pure vol position like VIX futures it works well until the skew resets :)

Hmm. To be honest, finance is a shitty field and trading/PM is a shitty career in that field. -- The time when you can make a ton and get out are almost certainly gone. Most easy opportunities anywhere are quickly dissipated by market-makers or funds. -- As a trader, you are only as good as...

Apparently we are saying different things and yet we are both right :)

No, he means that (a) a relief rally will hurt you on both (you lose on your short gamma and you lose on your long vega) and (b) you will find yourself losing money in calm upward market due to vols selling off without the corresponding pick-up from gamma (especially if you are already selling...

Yup, they do. In most cases it would be better if they did not :)