Option replication and exotics journal

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Quote from kalashnicac:

Hey what's wrong with french brokers? :mad:
They have the reputation of having the best financial engineers...
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Please call some of those in to repair the Euronext/Liffe exchange then, since it is has serious quality problems all the time. Since the french took over our Aex (Amsterdam) exchange a few years ago, it has gone from bad to worse.
My only hope is that they will not get their hands on either the London or the Frankfurt exchanges. If that happens I will move my trade to the US for certain.

Ursa..
 
Quote from kalashnicac:

Hey what's wrong with french brokers? :mad:
They have the reputation of having the best financial engineers...



Exotics are also available for retail customers at betonmarkets (GB)-currencies and indices.
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Tongue in cheek. They are w/o a doubt the best in Europe. They're one of a few who will even make size-markets very quickly in structured product.
 
Quote from MajorUrsa:

Please call some of those in to repair the Euronext/Liffe exchange then, since it is has serious quality problems all the time. Since the french took over our Aex (Amsterdam) exchange a few years ago, it has gone from bad to worse.
My only hope is that they will not get their hands on either the London or the Frankfurt exchanges. If that happens I will move my trade to the US for certain.

Ursa..
More...

I feel your pain. Never had a good experience with Euronext when I was trading through the Ecco front-end.
 
Nikkei double barrier[binary outside strangle] -- 11,650/12,580
Premium: 11,140,000Y
Payout: 22,000,000Y [includes prem paid]
Expires: Aug 19, 2005
Negative edge: 1,425,000Y
Neutrality: 12,115 basis Nik cash

Traded at Osaka close last night. Cheap gamma, but I don't expect much movement. Famous last words.
 
Quote from riskarb:

USDCAD barrier[binary long call] -- 1.2095
Premium: $15,200 USD
Payout: $25,000 USD [includes prem paid]
Expires: Aug 19, 2005 at 10am EDT settle
Negative edge: $1,200 USD

Well within one sigma at the barrier. The gamma is incredibly-cheap considering all the spot vol. Tried to make a case for short gamma, but couldn't... so here's a loooong gamma play. Wanted a 1:1 r/r, but didn't want to extend past 1.2100 on spot to get it.

Short 600k USDCAD from 1.2025 into a buy-stop at 1.2097

Synthetic short straddle. Flat deltas.
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Short 1mil from 1.2008 avg.
 
Quote from riskarb:

Sold 10 ES into Dax exotic at 1235.00
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r/a

didn't know you had started a journal... hope you keep it going.. definitely going to check it out.

regards,


Ice
:cool:
 
I'll be incorporating hybrid butterfly positions in the journal; specifically, positions incorporating both convex(vanilla) and binary payoffs. It is impossible to replicate the short-gamma/vol iron butterfly with an american-binary body-strike. The only method of trading the hybrid "long" butterfly is to trade the position as a short g/v vanilla body + long g/v binary wing-barrier. Positions will be limited to hybrid short gamma flys as I refuse to take a fractional r/r.

I will replicate with OTC vanillas over listed options since american binaries are predominately duration bets over vol. It's critical to carry identical durations.

Why do this? American "touch" barriers are expensive; typically twice the $prem that would be paid for the euro-variant, but they allow for a lot of gamma trading flexibility on the vanilla position if/when the wing-event is reached. I am enamored with long flys for many of the reasons I've stated in this and other threads; long upside gamma + short downside gamma, r/r, greek mag.

The most compelling reason for trading the short gamma hybrid butterfly is the short convexity via the short vanilla body straddle.
 
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