Fantastic journal... good to have you back, riskarb...
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Option replication and exotics journal
- Thread starter riskarb
- Start date
- Status
- Not open for further replies.
Purchased the CME 280/300/320 call fly for $5.50 today. A bit OT, but figured I'd post the play. Vols haven't come in as hard as I assumed they would.
Heard from my broker that the bank is making a market in DAX exotics. Touch/no touch, caps, knocks... Will price some today and possibly trade some in the morning. Dax vols have been very quiet, not ideal for selling gamma.
Heard from my broker that the bank is making a market in DAX exotics. Touch/no touch, caps, knocks... Will price some today and possibly trade some in the morning. Dax vols have been very quiet, not ideal for selling gamma.
DAX double:
Traded the 7d 4900/4750 double barrier[range]. Entire premium paid is lost if either strike is hit. This differs from a conventional double-knockout in which the opposing strike would remain "live" if one were hit. A fixed payout of $150k EUR is paid if neither k/o barrier is reached. Position risk and payment for the position is $50k EUR. I've been using various models to price; finite difference, Laplace transforms, among others.
Dax double barrier[binary k/o range] -- 4900/4750 K/Os
Premium: $50,000 EUR
Payout: $150,000 EUR [includes prem paid]
Expires: Aug 3, 2005
Negative edge: $9,000 EUR
A short strangle would be the analogous position in the vanilla-options. Obviously there are significant differences. There are no binary conditions with a vanilla straddle, yet risk is unlimited on the call[vanilla].
Defined: Short gamma/vega binary-strangle with a debit haircut. I own a piece of this trans, brother's fund is the holder.
Traded the 7d 4900/4750 double barrier[range]. Entire premium paid is lost if either strike is hit. This differs from a conventional double-knockout in which the opposing strike would remain "live" if one were hit. A fixed payout of $150k EUR is paid if neither k/o barrier is reached. Position risk and payment for the position is $50k EUR. I've been using various models to price; finite difference, Laplace transforms, among others.
Dax double barrier[binary k/o range] -- 4900/4750 K/Os
Premium: $50,000 EUR
Payout: $150,000 EUR [includes prem paid]
Expires: Aug 3, 2005
Negative edge: $9,000 EUR
A short strangle would be the analogous position in the vanilla-options. Obviously there are significant differences. There are no binary conditions with a vanilla straddle, yet risk is unlimited on the call[vanilla].
Defined: Short gamma/vega binary-strangle with a debit haircut. I own a piece of this trans, brother's fund is the holder.
Quote from riskarb:
DAX double:
Traded the 7d 4900/4750 double barrier[range]. Entire premium paid is lost if either strike is hit. This differs from a conventional double-knockout in which the opposing strike would remain "live" if one were hit. A fixed payout of $150k EUR is paid if neither k/o barrier is reached. Position risk and payment for the position is $50k EUR. I've been using various models to price; finite difference, Laplace transforms, among others.
Dax double barrier[binary k/o range] -- 4900/4750 K/Os
Premium: $50,000 EUR
Payout: $150,000 EUR [includes prem paid]
Expires: Aug 3, 2005
Negative edge: $9,000 EUR
A short strangle would be the analogous position in the vanilla-options. Obviously there are significant differences. There are no binary conditions with a vanilla straddle, the risk is unlimited on the call[vanilla].
Defined: Short gamma/vega binary-strangle with a debit haircut. I own a piece of this trans, brother's fund is the holder.
Paid 39.50 on 20 ES to hedge the barrier.
- Status
- Not open for further replies.