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Apparently, some things improve with age.I have spent the past year dealing with a young partner who thought he's a hot shot. The story did not end well for him. Did not go well for me either, since I literally wasted a year dealing with his immaturity and ambitions. The new guy that just...

Your Vega will move as root of time in short term expirations (e.g. 3m vs 6m) while it generally moves closer to linear in longer term expirations (e.g. 1y vs 2y). Mostly. Obviously there is also a question of strike.

and I got for it was a lousy T-shirt... :) On a serious note, you are both right. On one hand, a lot of experienced people will use theta as the primary proxy to the direction of risk premium in the book. On the other hand, it's impossible to properly manage risk from any single number, either...

It the theta is low, that means that either the size is not significant or that the moneyness is very low. Either way, it's still a better indicator of risk then any other instantaneous Greek. I am just saying that if I was able to see/remember a single risk metric for the book (which a trading...

Disagree there. I think theta is a primary risk indicator/metric for a book. If you are collecting, you are somehow short risk premium, while any other metric could be misleading for a complex book.

It's not a trivial task. For cash and carry underlying, you should have a perfect surface (unless there is some sort of carry uncertainty). For non fungible futures you need a model of the curve which will be different for each product. E.g. for Eurodollar futures you can use something like LMM...

It's gonna be pretty small. Switched like that are commonly done in the OTC space and you'd probably pay 0.5 vol for it.

Ah, ok then. Once you go significantly beyond the last listed (e.g. my example), you will get rather wide markets. Any MM would want a significant statistical edge since finding an offset is going to be tricky. The general MM approach is usually to guess your side (which, in case of most SN flex...

LOL. In order to print a flex, you need someone to make a market on your RFQ, regardless of avaliblity of CBOE system. Is someone from CBOE gonna make you a market on 5y 90% VRX call? PS. I am surprised it's so hard to understand.

System? Dude, people repeatedly tell you here it's bespoke and you don't believe them. Sure, I can get you a quote if you want.

It was definitely not as simple as you think. I know a lot about THIS particular transaction. Most times you see a large flex on hit the tape (especially long dated), it's just someone flipping a large OTC trade to exchange. Helps a lot with capital usage and CP risk.

People who argue against it don't really understand GBM so it's pointless. In reality, it's equivalent to "naive hedging" of an options contract, except LETFs are continuously convex.

Flex is there mostly to optimize margin/capital for large institutional trades, I've done a lot of them. To trade any flex contract, you need an MM or anoter CP to make the other side. Guess what, "You will need to be trading real size for anyone to be interested" as minmike has eloquently put it.

On the expiration morning, there is usually a fairly liquid market in front month variance which kinda makes manipulation attempts rather scary these days. That is, if you try to to change the strip (e.g. put in a bid), you can get done by someone who is trying to replicate the 30-day variance...

If you want to trade FX options, your choices are really (a) OTC, which in most cases requires an ISDA with a few exceptions (b) Futures options, which are quite liquid and have very reasonable parameters (c) Options on various currency/basket ETFs (d) Various hacks like equity exchange-listed...

Since you are apparently more experienced, I would love to hear how you would manipulate cash settled options...

Mav, the SPX futures market seems to be perfectly fine and it's cash settled. I think opposition to cash settlements is less so in equity investors (probably because the market itself is a bit fictional).

I disagree. A lot of HF clients, for example, want to have cash settled options because they don't want to deal with the ensuing cash position.

I never mind and asking questions is never a bad thing. If you have a meaningful position expiring in the index space, you usually try to trade combos that have the same expiration. Eventually it all flows into a cash expiration of futures, so you are not really carrying any delta execution...

Yup,as well as simple hassle of getting out of delta at expiration. In the OTC world, MM would still insist on physical settle or on some sort averaging.