Option replication and exotics journal

[riskarb]

Quote from riskarb:

Dax cash single barrier, no touch -- 5760

The horrific luck that occasionally occurs when trading exotics. I knew I had a problem this am when I awoke to overnight voicemail. Everything looked ok when I booted quotes and saw the DAX -15 on the day. Unfortunately, cash took out the barrier by 63 cents at the open. Resting stop concurrent with the cash-equivalent had me selling futures at 5772. I will wait for better setups and will avoid DAX as the implied remains well under stat vols.

Net on trade: ($478,000) Sub-account took a hit this week, but remains +82% since inception of journal. Will limit to 14-30d positions on Nikkei, NDX, SPX.

 

[IV_Trader]

Quote from riskarb:

The horrific luck that occasionally occurs when trading exotics. I knew I had a problem this am when I awoke to overnight voicemail. Everything looked ok when I booted quotes and saw the DAX -15 on the day. Unfortunately, cash took out the barrier by 63 cents at the open. Resting stop concurrent with the cash-equivalent had me selling futures at 5772. I will wait for better setups and will avoid DAX as the implied remains well under stat vols.

Net on trade: ($478,000) Sub-account took a hit this week, but remains +82% since inception of journal. Will limit to 14-30d positions on Nikkei, NDX, SPX.

Couple of days ago , the 5760 One Touch was 1.1m to win 2m.
You could place this bet and "lock" the loss on exotic of 300k (total premium 2.3m to win 2m) and keep your profit on hedge ?
What am I missing here , B ?
TIA

 

[riskarb]

Quote from IV_Trader:

Couple of days ago , the 5760 One Touch was 1.1m to win 2m.
You could place this bet and "lock" the loss on exotic of 300k (total premium 2.3m to win 2m) and keep your profit on hedge ?
What am I missing here , B ?
TIA

Look at the posted futures fills and the debit req. Paid 1.205mm for the barrier. I hedged light on the order of 130 futures... 380 long was the req to maintain b/e at the barrier. I will run the math again, but I think it's spot-on.

Edit: $458,000 loss -- I was off nearly a handle on fx-conversion.

 

[IV_Trader]

Quote from riskarb:

Look at the posted futures fills and the debit req. Paid 1.205mm for the barrier. I hedged light on the order of 130 futures... 380 long was the req to maintain b/e at the barrier. I will run the math again, but I think it's spot-on.

right , 1.2m for original premium plus 1.1m for new (one touch) , that's how I got 2.3m total

 

[riskarb]

Quote from IV_Trader:

right , 1.2m for original premium plus 1.1m for new (one touch) , that's how I got 2.3m total

1.080mm + 1.205mm = 2,285,000 debit exotic reqs
Hedge offset = 1,322,000 gain from futures

Net: ($963,000) on the pair.

 

[IV_Trader]

Quote from riskarb:

1.080mm + 1.205mm = 2,285,000 debit exotic reqs
Hedge offset = 1,322,000 gain from futures

Net: ($963,000) on the pair.

where is 2m pay out for one of the bets ( given an overnight action , this would be on One Touch) ?
One of the bet MUST win , they both on the same strike/day.

 

[riskarb]

Quote from IV_Trader:

where is 2m pay out for one of the bets ( given an overnight action , this would be on One Touch) ?
One of the bet MUST win , they both on the same strike/day.

Both barriers were breached. They were not running concurrently, but both were no-touch short gammas -- the 1st was dead when the 2nd was placed.

 

[IV_Trader]

Quote from riskarb:

Both barriers were breached. They were not running concurrently, but both were no-touch short gammas -- the 1st was dead when the 2nd was placed.

steps :
1.Placed a No touch (I loss if hits 5760) bet 5760 for 30d , 1.2m to win 2m.
2. Two weeks later placed a One Touch (I win if hits 5760) bet 5760 for 15d , 1.1 to win 2m
3. Two days later : price hit 5760

And I loss both bets ? I thought I will collect 2m (guarantee) on one of them for a loss of 300k ( and keep the gains from hedging , if any was done).

 

[momoneythansens]

That sucks, bad luck. 63 cents!

Quote from riskarb:

The horrific luck that occasionally occurs when trading exotics. I knew I had a problem this am when I awoke to overnight voicemail. Everything looked ok when I booted quotes and saw the DAX -15 on the day. Unfortunately, cash took out the barrier by 63 cents at the open. Resting stop concurrent with the cash-equivalent had me selling futures at 5772. I will wait for better setups and will avoid DAX as the implied remains well under stat vols.

Net on trade: ($478,000) Sub-account took a hit this week, but remains +82% since inception of journal. Will limit to 14-30d positions on Nikkei, NDX, SPX.

 

[riskarb]

Quote from IV_Trader:

steps :
1.Placed a No touch (I loss if hits 5760) bet 5760 for 30d , 1.2m to win 2m.
2. Two weeks later placed a One Touch (I win if hits 5760) bet 5760 for 15d , 1.1 to win 2m
3. Two days later : price hit 5760

And I loss both bets ? I thought I will collect 2m (guarantee) on one of them for a loss of 300k ( and keep the gains from hedging , if any was done).

You're off on #1 barrier placement. Both were no touches.