New invention for the derivatives market - How to profit of it?

[Captain Caveman]

Well, in fairness, a lot of that stuff made a comeback in the last year just in time to blow up a bunch of funds during the corona crash.

Hedge funds and the like are not covered up the regulations governing retail clients and tradable products though.

There are dozens of types of options. There are unusual to very strange derivatives traded in the OTC market. Any quant in a bank can flex a bit his mental muscles and come up with a novel derivative.

that was bascially my job, I would produce a new idea every monday, every investment bank was the same back then. The more complex you make it the more potential payoff you could offer, e.g. 20% coupon (except the chances of getting it were slim and none). We would sit their scratching our heads thinking what new derivative we can come up with up that week based on some half assed economic report, which would have a counter view the following week Most of them made little sense. Quants produce general pricers using scripting language that can feed in any sort of fancy payoff, lots are like a sophiscated monte carlo simulation.

 

[Dazz]

I do not have to feel scammed for him to be a scam - there is not cause and effect operating there; he posted for review so people need to see it to review and ps - he can show it for up to 12 months before he has to file a patent - your comment is ignorant. If he was always too poor to file a patent then this not the forum to discuss patent filing. I am a patent lawyer.

 

[Pekelo]

Maybe I am getting this wrong, but OP's model (assuming that it describes option values more correctly than current ones) can show mispricing of the broker's option prices. Then all he needs is to find the most mispriced options and trade against the broker. In the long run he should be making money, no patents or extra customers needed.

 

[Aquarians]

Maybe I am getting this wrong, but OP's model (assuming that it describes option values more correctly than current ones) can show mispricing of the broker's option prices. Then all he needs is to find the most mispriced options and trade against the broker. In the long run he should be making money, no patents or extra customers needed.

I understand that he's NOT referring to current options, so no miracle pricing formula for the established framework (ex: European options on index or American options on stock). Instead of the likes of Captain Caveman , came up with some new derivative (option? variance swap? credit default swap? can be anything).

The market for a new product is by default extremely limited and more a problem of marketing than patents.

 

[Pekelo]

At some point he has to describe it in more details to someone, so he might as well start here and give us a better picture. Maybe a casino would like his idea to use it in sports instead of with stocks.

 

[thecoder]

Ok, said registrations are done now. Phew, was much paperwork c-rap

 

[thecoder]

I understand that he's NOT referring to current options, so no miracle pricing formula for the established framework (ex: European options on index or American options on stock).

But it very well is about "current options"

 

[thecoder]

The invention is about a new type of PUT, trademarked by me as "FairPut".
This FairPUT costs the same as a regular CALL (all params equal),
but then gives also the same payout like the CALL when mirrored!
Ie. FairPUT is the 1:1 mirror image of a CALL.
FairPut is, as the name implies, a fair PUT, since as one can easily prove (already done here) the normal PUT does give a very unfair payout compared to CALL (even if both have same params and do cost the same). FairPUT solves that problem.

Over time I think FairPUT will replace the old PUT all over the world

I'll prepare a short text with some examples. Either today or tomorrow.

But what do you think of the idea itself?

Btw, this is still BSM. FairPUT is just a 3rd method besides the regular CALL and PUT.

 

[thecoder]

Maybe I am getting this wrong, but OP's model (assuming that it describes option values more correctly than current ones) can show mispricing of the broker's option prices. Then all he needs is to find the most mispriced options and trade against the broker. In the long run he should be making money, no patents or extra customers needed.

The PUTs are all mispriced as they don't give the same payout like a CALL with same params and premium.
Logic would expect that the payout should be equal for such a CALL and PUT, but there is a big gap favoring the CALL. This was already proved in another thread here, and that was the motivation for developing my FairPUT

 

[Pekelo]

The PUTs are all mispriced

If they are cheaper, buy them, if they are more expensive, sell them. Pretty simple....