Option replication and exotics journal

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Quote from fader:

hi riskarb - i am curious about your choice of the strike - the 17 / 17.250 / 17.500 strikes all have ~24% implieds - the 17000 strike has (slightly) greater vega and theta than the 17.500 - i am guessing that you chose 17.5 because it's lower delta / less hedging required, at least initially? thx.
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I have an o/u line on my sheets which was showing +200 basis in smile on the 17500c/ATM. I don't like to sell upside curvature, but the vols were a bit better on the 25d. 25d puts were trading 100basis over 25d calls, but I don't want to be net-short puts in this market.
 
hey risk;
liquidated those calls ystdy @open; futs were up 40points, but theta weakening somewhat and vega gains cut off 16points on the 17500strikes' premium: had no choice there, bid getting too close to b/e.

Have to be fair here, got lucky with this gamble: timing was off and I knew no much upside was left, also yen had a consecutive 7weeks winning streak (if Im not mistaken), and odds for gaps up or further gains were very limited, while risk on downside was pronounced.

U tho, look fine with your synthetic play; 16550 has proven to be strong support and as far as I can see it looks sideways action, also there's no fundamental reason yet for a technical breakdown.

I have to guess u are in 'till after boj meeting to
take advantage of expected IV drop.

All the best
b
 
Thanks Bit; and a good decision to get out when you did. Vols have dropped to 22 early in the SGX day-session. Those 17500s are trading 135 now.
 
Got very lucky to say the least; already survived a 230 points drop a few days ago when sgx futs after gap down closed above previous days highs: a miracle saved me and was not looking to get into trouble.

Cheers
b
 
Short 30 SGXNK Mar synthetic 16500p
Short 100 SGXNK Mar 17500c
Long 8 futures

Neutral delta at 16500. Downside b/e at exp is 15,650.
 
Quote from riskarb:

Short 30 SGXNK Mar synthetic 16500p
Short 100 SGXNK Mar 17500c
Long 8 futures

Neutral delta at 16500. Downside b/e at exp is 15,650.
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Vols weaken at the open -- position is up $6k on the day thus far. I'll carry this through the weekend.
 
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