Option replication and exotics journal

[riskarb]

Quote from riskarb:

SPX no touch -- 1167.00
Premium: $48,600
Payout: $100,000 [includes prem paid]
Expires: Oct 20, 2005

No hit, +$51,400. Covered 50 short ES at 1180.00, short from average of 1185.00: +$12,500

Exotics blotter: +$824,000


My most recent SPX no touch was hit, but the Dax touch will likely be reached tomorrow. In any event, I have plenty of time to reach Dax 4825 for the remaining position. Will settle that combined trade as one blotter entry.

 

[riskarb]

Quote from ssternlight:

By my IB quotes you missed getting hit by a tick...all that matters.

These positions are based upon cash as spot... not futures.

 

[ssternlight]

Quote from riskarb:

These positions are based upon cash as spot... not futures.

Bummer...

Thanks for clearing that up...

 

[Trend Fader]

Just curious out of the $880k in profit.. how much can u attribute goes to commisions?

 

[riskarb]

Quote from Trend Fader:

Just curious out of the $880k in profit.. how much can u attribute goes to commisions?

There are no commissions per se... execution in built into the (-)edge paid on the exotics. I pay $5/rt for pit futures and $1.50 for electronic futures. I've rounded-down to the nearest hundred when calculating return. I model each trade and am typically paying 10-12% in edge/ThVal on these exotics. Weekend decay > edge paid.

I am more concerned with my distribution prediction/edge paid. Can't avoid paying a substantial vig when trading a dealer/OTC market.

OTC dealers compute the edge+replication costs. They're concerned with what it will cost to replicate, not with a commission.

 

[riskarb]

Nikkei double barrier no touch -- 12,600//13,600
Premium: 14,100,000Y
Payout: 25,000,000Y [includes prem paid]
Expires: Oct 26, 2005


Fell like a stone once we clipped 13,700 this week, but don't see a decisive break of 13,000. Neutral here at current Nikkei cash.

 

[riskarb]

Quote from riskarb:

DAX touch -- 4825.00
Premium: $62,800 USD
Payout: $120,000 USD [includes prem paid]
Expires: Oct 26, 2005

Long 7 DAX from 4907

Bought 20 Dec Dax from 4856 avg. Position is long 27 from 4870 avg. Traded within 6 points of the barrier.

 

[riskarb]

SPX double no touch -- 1165//1210
Premium: $50,800
Payout: $100,000 [includes prem paid]
Expires: Oct 27, 2005

Neutral at 1188, higher when priced for smile. Obviously going somewhat long here.

Long synthetic straddle in DAX, neutrality is a bit under where DAX cash closed -- long 27 DAX futures into the touch barrier at 4825.

 

[ssternlight]

Well you've certainly got next week's trades on...

 

[hufra0706]

Quote from riskarb:

I model each trade and am typically paying 10-12% in edge/ThVal on these exotics.


What do you mean, when you say, that you model each trade?