riskarb's trading journal

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Quote from riskarb:

I got my start in exotics with the major crosses at 10-12 vols. FX vols are <9% on the majors and the stat vols usually exceed implieds. I still trade a carry portfolio, but it's a ton of work and would require 10x the effort to outline it here. I traded FX vanilla OTC back in the mid-90s, but the hours were brutal. I had a trans-lux board in the bedroom and carried a Metriplex-Reuters FX/Alert pager with me at all times. I won't trade vanilla short gamma on FX again.

Are you referring to vanilla, exotic, or both? I have traded a lot of crude in the past, but the fills are horrible in NY. I still trade a little crude on the listed-side, but 10-50 lots in a retail account [Man].
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I also was suspicious of stat vols being higher than implieds and so am trying to rework my trading method as i'm used to selling sp gamma. if i can't sell vanilla gamma because of little or no expectency maybe long gamma with straddles/strangles/backspreads is the way to go. especially since some of the overnight moves can be substantial. I also see a serious lack of mean reversion tendencies when compared to equities.

on the crude side, looking at vanillas there also. i've heard horror stories about fills as well especially in a fast market. hopefully with the use of globex it will become more fair. the vol skew on the call side is pretty pronounced and it appears to me there is opportunity in short gamma positions. thanks.
 
I am sensing a bounce tomorrow in ES. If it breaks down then we will see 1200 in a few weeks, especially if FED leads to negative sentiment. If I were riskarb, I would go long a touch option for 1215 strike for middle of July, where you make $$ if it is touched :D
 
Hmmm actually if we break through current support I see us touching 1215.... what if you take the TOUCH as opposed to the no touch. How is that pricing :)
 
Quote from optioncoach:

Hmmm actually if we break through current support I see us touching 1215.... what if you take the TOUCH as opposed to the no touch. How is that pricing :)
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Sorry, typo. I quoted the touch. The touch + no touch market: 100 - touch[no touch] = no touch[touch]; or you can think of the barrier market as touch on the bid, no touch on the offer.
 
OK hmmm. SO if you go long the Tcuch for $40K at a strike of 1215 how can we hedge this partially? Been thinking and nothing easy comes to mind...
 
Quote from optioncoach:

OK hmmm. SO if you go long the Tcuch for $40K at a strike of 1215 how can we hedge this partially? Been thinking and nothing easy comes to mind...
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Go long spot/futures/calls. Replicate in a higher vol index like NDX by trading a smaller delta/notional no touch. Much the same as would be done to hedge a number of deep otm long puts.

I agree that we might see a rally tomorrow. Nikkei is not leading to the downside. Regardless, I've generated too many long inter-market deltas.
 
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