riskarb's trading journal

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riskarb,

thanks for the education. do these strategies require prime brokerage accounts (exotics in general) since it's all OTC?
 
Quote from riskarb:

SPX cash single barrier, no touch -- 1277.00
Premium: $265,000
Payout: $500,000 [includes prem paid]
Expires: May 29, 2006
Negative edge: a lot
Strike/barrier volatility: 15%
Symmetrical hedge: -300 June ES futures
Initial hedge: -220 June ES futures from 1297.50
Weak downside^2 [g/d] short exotic straddle
Date/time: 3:45 EDT



Riskarb, what do you mean, with negative edge?
Do you calculate it or is ist just a guesstimate?
If calculateted, how do you do it?
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I just read the preceding 8 pages of posts in this journal and I am uncomfortably humbled.

translation: there's alot goin on here I don't have a clue about.

I am however impressed by

the relative sophistication of the posters and riskarb as well as riskarb's and others willingness to share

I just started reading Natenberg and find all this intriguing but I imagine until I lose some money (or all of it) will I learn beyond basic option strategies.

11Blade
 
Risk,

Good to see you are back in the Journal Business!

Do you ever do anything in Crude Oil or Natural Gas?
 
Quote from momoneythansens:

Hey Riskarb,

A few questions/clarifications to bring myself and perhaps others up to date:

  • What are you using to price these exotics? Are you still using the UNIVDRV add-in from MBRM? How does it compare with the trinomial pricing on Hoadley.net?
  • Are you still trading the exotics through DB, SocGen and BNP-Paribas. Anyone else?
  • Hedging strategy - why are you favoring futures over vanilla/convexity (is it the non-standard timeframes? - can weeklies be of use here?)? Also, if using futures, is there any merit to scaling in to the futures position to replicate convexity? Have you considered automating the hedging aspect or is this too much trouble/too much risk of whipsaw?
  • Hedging points - will you be hedging based on sigmas or some other criteria?
  • Might be way off base but, have you looked at trading FLEX options for hedging or is the size requirement too onerous?

Question overload ha!

For the benefit of others, some educational resources on these topics that might be useful can be found at Finpipe.com,Risklatte.com and in Taleb's Dynamic Hedging

Look forward to the unfolding of journal.

MoMoney.
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Mo thanks as usual for some very interesting links...at least I will kinda understand what he is doing although it is so far out of my league it may as well be Pluto:p
 
LOL, yes. Must emphasize, edge loss on these products can make the b/a spreads on SPX options look like charity :)

Quote from Aardvark:

holy cow:eek: are these things a) legal and more importantly b) legit?
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Yep I can attest to that. I play some of the hit/miss binary options in FX provided by Oanda. Basically you can use the options to make directional bets on the underlying only, no chance of actually eeking out good profits from trading the options themselves.
 
Another great site to learn about binary options and trade with small capital is

www.hedgestreet.com

this site is the bombdiggity, mention my name and get free transaction costs for sixty days, $1.50 thereafter. Each option either ends itm worth $10 or it doesn't $0. They are legit and made a strategic alliance with the CBOE.

Their products range from energy to metals to housing derivatives to macro-economic numbers(CPI, PPI,etc.).

I don't work for them but I am a customer.
 
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