DP's exotics journal

I don't plan on running out and trading them, I am just curious how they work. What determines the higher vs. lower price? Who buys these smart money or retail traders? And if there is one side that buys them is there a way to monitor the pricing as a sentiment indicator (if it is cheaper to go lower vs higher maybe that is telling me something)?
 
drownpruf said:
I had to pay 16.4K to cover my downside barrier.

S2DLHms.png
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I'll get to the questions in a bit, but this paid on the 70 touch (by a pip to 69). The DNT is still alive.
 
xelite777 said:
My advice on binary options? Stay away from them in general, in the long run the mathematical odds favor the seller (the one selling you the option), not the retail trader (the speculator).

And the same can be said about options in general.

For example, did you know that the famous Black-Scholes model for calculating the premium of an option is based on a false premise and has been designed to favor the sellers?

However, if used correctly, options can be useful under certain (and perhaps narrow) circumstances.
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Xelite is trying to up his post record. He wants to get to 5000 posts by the end of the summer, hence he comments on everything.
 
DP,

Thanks for the exotic options thread, never understood how it's structured.

How do you determine when to hedge the position, and why do you only hedge after a 70 pips drop, and only for 1/2 your original investment? Do you hedge on spot at initiation of position? Thanks.
 
Covered the downside on the reversal yesterday? Nice ... So if it trades under 50 the DNT is worthless but a least you gained some back on the touch.
 
contra said:
Covered the downside on the reversal yesterday? Nice ... So if it trades under 50 the DNT is worthless but a least you gained some back on the touch.
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Yeah, sucks but it's a moral victory for me as I had a decent price to cover a portion of the downside. I've all but written off the DNT.

I just did this one:

fQ2Qd6j.png


14D, 35D bull touch. I expect that 3810 will be hit by this coming Tuesday. May23, 24,200//30,000. 81/100 hits. 23% return if touched. Rationale was a bull signal on a vola system.
 
drownpruf said:
Yeah, sucks but it's a moral victory for me as I had a decent price to cover a portion of the downside. I've all but written off the DNT.

I just did this one:

fQ2Qd6j.png


14D, 35D bull touch. I expect that 3810 will be hit by this coming Tuesday. May23, 24,200//30,000. 81/100 hits. 23% return if touched. Rationale was a bull signal on a vola system.
More...

how do you measure volatility (mathematically) on FX as opposed to options?

any formulas?
 
I don't know the first thing about exotic options trading. But wouldn't you say these kind of equity swings(-12% on the first 2 trades, and now risking ~25% of nav in the next trade) are a wee bit extreme?
 
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