riskarb's trading journal

CPTrader · May 24, 2006

Risk,

As always thanks for sharing. I am curious why do you seem to profer the DNT (double no touch) barrier as opposed to the range option i.e. where you collect payout as far as the asset closes WITHIN the range. I kow the gearing is less with the range option, but so is the risk.

This is not criticism, just curious as to your thinking process here.

Thanks again.

Aardvark · May 24, 2006

Quote from riskarb:

No, that was the original intention... but it's not a $300k loss, it's $91k. I always hedge -- I don't trade exotics passively. Trading $250-300k barriers is far too risky for $1mil. I am leveraging based on the aggregate portfolio of sub-accounts: $9.1mm

oh ok that makes sense...I know you were not actually down but up the 91...it was the brief hit I was alluding to but understand now thx...enjoying the journal even tho understand precious little

riskarb · May 24, 2006

Quote from CPTrader:

Risk,

As always thanks for sharing. I am curious why do you seem to profer the DNT (double no touch) barrier as opposed to the range option i.e. where you collect payout as far as the asset closes WITHIN the range. I kow the gearing is less with the range option, but so is the risk.

This is not criticism, just curious as to your thinking process here.

Thanks again.

Digitals are much more difficult to hedge and model as you approach expiration. I will be trading some on this journal, but selectively. The sub-account I manage produced >180% in the last 10months with a >4.0 Sharpe and largest monthly DD of 11.9%. >90% of the trading involved binaries; singles[synth combo], and double barriers. I can't remember making money on a single digital play. It's highly likely that a digital will go OTM at expiration if it's close to the strike, but often at twice the debit of a comparable binary. I can hedge the risk with a barrier, but a digital requires too much hedge-risk on the replication... barriers get a bad rap, but you get what you pay for.

I'll also be playing some up/down and out calls, puts and combos.

riskarb · May 24, 2006

Quote from Aardvark:

oh ok that makes sense...I know you were not actually down but up the 91...it was the brief hit I was alluding to but understand now thx...enjoying the journal even tho understand precious little

Actually, it's a loss of $91k. 1% of the total portfolio among various accounts.

riskarb · May 24, 2006

Nikkei vols remain well bid, gamma remains fat. I will be trading an exotic in Nikkei later tonight.

frisbeeca · May 24, 2006

Quote from riskarb:

The 1190/1300 double for 6/14/06 is $620,000 on $1,000,000 [my expo model]. Would you like to place your bet? =)

Just for amusement Riskarb, what would the bet be on the 1190/1320 for 6/14/06? How much moola do you have to put in play to get someone's attention?

riskarb · May 24, 2006

Quote from frisbeeca:

Just for amusement Riskarb, what would the bet be on the 1190/1320 for 6/14/06? How much moola do you have to put in play to get someone's attention?

$818,000 on a million. $82mil would raise some eyebrows. =)

riskarb · May 25, 2006

Quote from riskarb:

Short 70 ES from 1250.00
No touch at 1232.00

Short an additional 10 from 1266.00

TGM · May 25, 2006

Quote from riskarb:

Short an additional 10 from 1266.00

u ever take advantage of the midnight rally by selling puts late in the afternoon and buying them back the next morning??? (in the stock indexes)

riskarb · May 25, 2006

Quote from TGM:

u ever take advantage of the midnight rally by selling puts late in the afternoon and buying them back the next morning??? (in the stock indexes)

No, not unless I expect outperformance by Asia and Europe overnight.