Option replication and exotics journal

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Quote from riskarb:

Dax double barrier[binary k/o range] -- 4820/4980 K/Os
Premium: $59,500 EUR
Payout: $150,000 EUR [includes prem paid]
Expires: Aug 10, 2005
Negative edge: $8,100 EUR
Neutrality: 4900 basis DAX cash

Been following the gammas on this one and the broker is offering it under $60k. Bought it a few minutes ago.
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Offset short futures hedge near the FDAX close last Friday. Fully expected to eat the debit on the exotic at a touch of 4820, but DAX cash never saw a print below 4832 today.

Sold 30 FDAX Sep at an avg. 4868 over the last 30mins.
 
Quote from SteveL91:

Interesting thread. Thanks for starting it, and I hope you'll run with it for as long as you feel like. I suspect I'll learn a lot from it.

Thanks again,
Steve
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YW, will do.
 
Quote from qazwsxedc:

Nice calls - what was your rationale for these two?
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The futures were a hedge against the delta position in the DAX exotic. There was no prediction involved; I was simply covering my ass.
 
Quote from riskarb:

Potential fly conversion:

Sold x GOOG Sep 300 straddles at $25.30 & 30.30% vols. Market was 25.20x25.60 on ISE's spread/combo order line.

280/320 wing combo is trading at 10.30x10.70 & avg. 31.00% vols.

Have not purchased the wing combo -- netted fly is trading at [$14.80], risk of $5.20.

The goal is to earn decay at the risk of gamma while earning opportunity theta on the wing combo within a week's time. Doubtful we'll see more than 2-3 points reduction in the current mark on the fly. We'll see, but I'd like to own the completed fly at a risk of $2.60 or lower.
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ATM vols are trading in the 29s, 100bp in edge as I write this. Wing vols are getting trashed. The wings are trading (1.50) lower, allowing for a risk on the fly of $3.60 from here. Nothing done.
 
Quote from riskarb:

Offset short futures hedge near the FDAX close last Friday. Fully expected to eat the debit on the exotic at a touch of 4820, but DAX cash never saw a print below 4832 today.

Sold 30 FDAX Sep at an avg. 4868 over the last 30mins.
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Covered the FDAX short at 4841 a moment ago. $55k earned on hedge[since inception], so I'll leave the exotic unhedged from this point. Simply due to the hedge gain nearly covering the risk on the exotic.
 
Quote from riskarb:

Covered the FDAX short at 4841 a moment ago. $55k earned on hedge[since inception], so I'll leave the exotic unhedged from this point. Simply due to the hedge gain nearly covering the risk on the exotic.
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Wow, dodged the 4820 bullet once again. Sold 10 FDAX at 4879 to flatten deltas a bit. Position marked at 98k EUR on the bid. Expect to see full payout.
 
Quote from riskarb:

Wow, dodged the 4820 bullet once again. Sold 10 FDAX at 4879 to flatten deltas a bit. Position marked at 98k EUR on the bid. Expect to see full payout.
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Covered the short 10 at 4919, out 12.5k. No hedge
 
Quote from riskarb:

ATM vols are trading in the 29s, 100bp in edge as I write this. Wing vols are getting trashed. The wings are trading (1.50) lower, allowing for a risk on the fly of $3.60 from here. Nothing done.
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Bought the Sep 280/320 outside strangle at $8.00 -- $2.70 risk on the fly from inception.

Vols are 27[28%] on the body[wings]. Have no intention of replicating the original straddle or adding any new positions in GOOG.
 
Quote from Trend Fader:

How much $ did u profit?
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42k EUR on the hedge. The exotic is still running until the DAX close tomorrow.

I've been getting PMs regarding brokers/ibanks who trade equity vol... These trades are done in my brother's offshore-feeder through DB, SocGen and BNP-Paribas. FX is handled through UBS and DB.
 
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