Option replication and exotics journal

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B,

Nice to see you doing currency trades. I have looked into carry trading as well but really couldn't figure out how to possibly hedge myself in case of a significant new development (natural disaster, terrorist attacks etc). I looked into the simple USDJPY and NZDJPY correlation trade but really couldn't figure out a logic in which I could potentially hedge my position in case say a disasterous earthquake hit JPY. How are you going about this with exotics? Thanks.
 
Quote from mahras2:

B,

Nice to see you doing currency trades. I have looked into carry trading as well but really couldn't figure out how to possibly hedge myself in case of a significant new development (natural disaster, terrorist attacks etc). I looked into the simple USDJPY and NZDJPY correlation trade but really couldn't figure out a logic in which I could potentially hedge my position in case say a disasterous earthquake hit JPY. How are you going about this with exotics? Thanks.
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Yeah, fx is a tough game for carrying 24h exposure. It's simple to solve for the barrier risk, algebraically -- I'll go over a trade tomorrow morning when I roll-over the GBP/JPY position. In essense, it's a short synthetic straddle which goes b/e at the barrier but isolates the +carry. I'll go into more detail tomorrow.

I'm still trading more index exotics, but haven't updated the journal as it's a bit ad nauseum. The book is up $1.9mil for the last 5 months, inclusive of the carry trade.
 
Sounds good. So you are up almost 40% in 5 months. Thats some sick trading considering your sharpe is above 3 still correct? Great work B.
 
Quote from IV_Trader:

r-a , any broker out there that takes exotic bets on individual stocks ? I see Betonmarkets.com covers four US stocks.
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Ig offers weekly expirations on uk stocks with min £20.000.000.000 capitalization. I don't know now but they might have expanded the range of products to us stocks.

Binexx might have more choice and the quoted odds are better: the price is influenced by mkt participants as well as by the fixed odds because it works as a real exchange.
 
I hope you mean market caps, not trader capitalization! ;)

I've looked at binexx, but don't think they're available for US clients, may be wrong on that. I can't think of anyone outside of SocGen's www.clickoptions.com that offer street-vol. clickoptions is only for EUR clients as well.
 
Still too lazy to run the numbers on the GBP/JPY trade; actually, it's simply that the GBP keeps taking out the highs. I went flat the carry trade in GBP/JPY a few moments ago in selling spot at 210.68.

I'm in a Nikkei double and a large SPX synthetic that goes OTB tomorrow.

Sold some Nikkei Jan 15,250 synthetic straddles at 700 tonight on SIMEX(SGX). Think we've come too far, too fast and Japan tends to go to sleep into the holidays.
 
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