Option replication and exotics journal

riskarb · Aug 29, 2005

Quote from riskarb:

Nikkei double barrier no touch -- 12,180 x 12,880
Premium: 4,600,000Y
Payout: 11,000,000Y [includes prem paid]
Expires: Aug 30, 2005
Negative edge: 424,000Y
Neutrality: 12,530 basis Nik cash

Vols have contracted into this bull run. Not as comfortable with the pricing, but it's the best offer I could find. Feel that the DAX vols will start to contract in line with Japan and US vols. Don't expect to be chasing hedges on this or the DAX double.

Nearing neutrality coming into the last few hours before expiration. I'll assume that the barrier will reach full payout.

Exotics blotter: +$144,500

Open positions:

Dax double no touch

riskarb · Aug 30, 2005

Quote from riskarb:

Long 5 more from 66, avg on 20 contracts: 4855.5

Sold 10 Dec FDAX at 4856, remain long 10 from 4855 avg.

riskarb · Aug 30, 2005

Quote from riskarb:

Sold 10 Dec FDAX at 4856, remain long 10 from 4855 avg.

Long 10 Sep from 4824.50
[long 10 Dec from 4855.00 avg]

riskarb · Aug 30, 2005

Quote from riskarb:

Long 10 Sep from 4824.50
[long 10 Dec from 4855.00 avg]

Covered 10 Sep at 4806; remain long 10 Dec from 4855

Exotics blotter: +$138,900

riskarb · Aug 30, 2005

Buying 10 Sep ES into my Dax upside barrier. Bot 10 at 1209.25 -- remain long 10 Dec FDAX. Expect an index rally tomorrow.

ssternlight · Aug 30, 2005

Quote from riskarb:

Covered 10 Sep at 4806; remain long 10 Dec from 4855

Exotics blotter: +$138,900

I haven't looked at the journal in awhile and am just paging through it now.

Just a quick comment, I can see that your return curve is volatile. Of course, on a $5M account there is not much overall volatility and I guess that's what makes it tick -- as long as the overall slope is upward.

Thanks for sharing your progress. It's a peek into a new world for me.

Sam

riskarb · Aug 30, 2005

The only way to limit variance is to limit size or always be right.

riskarb · Aug 31, 2005

Quote from riskarb:

Buying 10 Sep ES into my Dax upside barrier. Bot 10 at 1209.25 -- remain long 10 Dec FDAX. Expect an index rally tomorrow.

Sold 10 ES at 11.25; +$1,000

Bought 10 Sep FDAX at 4829. Long 10 Dec from 4855. Flat ES

Exotics blotter: +$139,900

CPTrader · Aug 31, 2005

Quote from riskarb:

The only way to limit variance is to limit size or always be right.

One of the cardinal truths of the markets!!!!!

riskarb · Aug 31, 2005

Expect a solid 50-60 points up in the DAX tomorrow. This Dax binary looks to be in a sweet-spot; sufficiently-distant from the upside barrier and I am long a lot of excess deltas with 20 long FDAX futures.