riskarb's trading journal
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Thanks...just curious because on the other double notouch's you did hedge. Also are you able to take the position off at any time? IOW do you HAVE to hold till Fri? How was the conference? I'm sure there were a lot of ET'ers there
Looks like NDX barrier was taken out :eek: Bad luck Riskarb.
A two sided-market can be quoted for these at anytime so yes, the option can be bought back prior to expiration.
Random thoughts:
Without hedging, the no touch becomes a straight bet on time.
With (full) spot hedging based on $debit of the barrier, potential loss into the barrier is negligible and even the prospect of "convergence gains" (gains on the hedge AND barrier not being hit) or if spot runs well past barrier, gains on the hedge larger than loss on the barrier. I think I saw Riskarb say this was the edge to the strategy.
So, in theory, drawdowns should be negligible. Whipsaw on spot hedge is one of the risks (negates the edge?). Spot volatility greater than implied when touch sold is another risk :eek:
Gamma is very large approaching the barrier but if hedging based on $ values and holding to expiration, who cares?
The concept is so simple, even I get it! However, discretion and skill are required for entry and hedging points and timing.
2 cents.
A two sided-market can be quoted for these at anytime so yes, the option can be bought back prior to expiration.
Random thoughts:
Without hedging, the no touch becomes a straight bet on time.
With (full) spot hedging based on $debit of the barrier, potential loss into the barrier is negligible and even the prospect of "convergence gains" (gains on the hedge AND barrier not being hit) or if spot runs well past barrier, gains on the hedge larger than loss on the barrier. I think I saw Riskarb say this was the edge to the strategy.
So, in theory, drawdowns should be negligible. Whipsaw on spot hedge is one of the risks (negates the edge?). Spot volatility greater than implied when touch sold is another risk :eek:
Gamma is very large approaching the barrier but if hedging based on $ values and holding to expiration, who cares?
The concept is so simple, even I get it! However, discretion and skill are required for entry and hedging points and timing.
2 cents.
Quote from RichardRimes:
Thanks...just curious because on the other double notouch's you did hedge. Also are you able to take the position off at any time? IOW do you HAVE to hold till Fri? How was the conference? I'm sure there were a lot of ET'ers there
Where did a fight break out... what did I miss ??!??!!?!
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