Recommendations on Options Software

We've traded a few messages in these forums; I ran a derivatives book (including all types of "exotics") and as usual, the increasing complexity of the product = more vig for the house. Some are 'bet' options others are barriers, some pay out if a target is hit, others if it isn't. One way we are effected by the presence of these options is when an exotic deriv book needs to rebalance a greek metric...more on that a little later.

These options have ridiculous (think discontinuous) deltas, insane gamma and exposures that plain vanilla options just don't have. Sell one type of exotic and you're long vega; as time approaches expiry in another, you can be so short gamma that 1000 long atm 1 week straddles won't cover it (technically).

One thing that you mentioned is really important - all these exotics are dependent upon the flies, skews and vol of vol. Watch the 25 delta flies; exotics traders will use them to adjust certain exposures...

My "handle" is one of type of exposure - dvegadvol - change in vega position for a change in the level of volatility! There's also dvegadspot - change in vega for a change in spot price - directly relates to the fly and strangle markets.

If you've got any questions about exotics, let me know.

Marc
 
dvegadvol,

That sounds quite interesting. It always amazes me how large
and complex the OTC market is and how the public and probably
most govt. officials don't understand potential exposure and
"fallout" from OTC derivatives. I think this industry is probably better to be self regulated with increased govt. audit by the SEC.
When govt. officials try to "improve" an industry they know nothing about ,it's bad for everyone. Look at the "Daytrading"
improvements to "help" investors & traders- .01 spreads, minimum 25k for pattern daytraders & increased regulation. The
govt. was probably well meaning, but they did not help the
industry or competition. I think the Goldman's & Merrll's have too much politcal clout to get "overregulated" unless there is a
OTC derivatives meltdown. Does any firm have exposure to ENRON(Credit Derivatives)? Time will tell.



Gene Weissman
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net
 
The busiest people on the credit derivs desk are always the lawyers! Or so goes the joke...

In talking to my friends still involved in said securities, save JPM and the surety bond reported in the FT, there doesn't appear to be any major disasters still lurking...

The FT said that JPM bought forward gas and crude from Enron and covered their credit (default / delivery) risk with $965mm in surety bonds from insurance companies.

Enron goes belly up, JPM goes to insurers, insurers say no way the forward gas and crude were in effect a loan to Enron.

Insurers essentially have said that they wouldn't guarantee a loan to Enron. It's a matter for the courts, I guess

There may be a few demons lurking in credit default swaps, but I've been told that they were funded swaps, and are still covered by collateral...

Argentina has much more potential destructive energy, imho as sovreign risk comes into view. I've heard that $10b of default protection triggered when Argentina suspended payments.

Regards,

Marc
 
Microhedge is a great product. Used it when I was on the sell side.

Also may want to check out Fincad (www.fincad.com). This is an excellent Excel add-on (macros) that does the simple (exchange traded options) to the complex (credit derivatives, converts, etc.).
 
Has anyone here experimented with downloading 15 minute delayed from a datasource and programmed a scanning system using C++ or VB thereby bypassing the need to buy the canned systems like optionvue or microhedge?

I am familiar with Access and VB and was thinking of downloading option data, using canned functions to derive the greeks and print out reports to pick out calendars, fly spread, undervalued,etc. Most systems commercially available are not customizable. Ex. I bought one system which scanned 100 stocks and recommended buying a straddle but when you look at the IV, they are at the 95% percentile. So if I followed this black box scan, I would've gotten killed!!

Thanks in advance.
 
Are there any other option scanning software out there other than OptionVue. The only ones I've come across are ivol.com and optionclub.com. Both have pre-set scans which are ok but are not customizable.

thanks
 
Scans such as ...
Implied Vol > historical vol by x amount

Implied vol of front month greater than back month by x% to buy/sell calendars

volume spike in any option that exceed x% of open interest

extreme skew wherein iv of call1 > Iv of call 2 by 5% for debit/credit spreads

Something like these on at most 15 min delayed NOT end of day

Thanks
 
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