riskarb's trading journal

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Quote from momoneythansens:

Like I said, hedging is for losers. Live fast, die young :D
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yeah,when i worked at Salomon,no intraday hedging was the mantra..not one of those traders survived the tail moves..not a one
 
Quote from riskarb:

Well, sure... but the assumption is a > even probability of reaching neutrality and producing convergence of the premium on the delta straddle to the atm.

The most successful practitioner I know of had a slightly better than random entry and produced a 80% hit rate on the delta straddle at 1:1 risk-reward.
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Sorry Risk, I'm trying to follow along but I was confused by your risk-reward statement. How did this practitioner have a 1:1 risk-reward on a short synthetic straddle? What hedge was this person using? Thanks in advance...
 
Quote from cohenmichaela:

Sorry Risk, I'm trying to follow along but I was confused by your risk-reward statement. How did this practitioner have a 1:1 risk-reward on a short synthetic straddle? What hedge was this person using? Thanks in advance...
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His target and stop was the $premium on the delta straddle // atm straddle; i.e., the delta straddle trading at $36.00, and the atm at $30.00. His target and stop was = $6.00. He would lock or offset if any futures/spot or option hedge that resulted in a $6.00 loss. Or simply a 6-handle loss on the underlying combo as the result of g/d and/or vegas. Certainly there would be times that a 1:1 risk was not achievable, but tempered by the large number of trades in which the combo was allowed to run in his favor.
 
Quote from taowave:

yeah,when i worked at Salomon,no intraday hedging was the mantra..not one of those traders survived the tail moves..not a one
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As riskarb would put it: "thanks for the remedial lesson on fat tails".

FYI, the post you quoted was not meant to be taken seriously (read: sarcasm) and was from some time last century.

Your comments re: Salomon are consistent with a book I'm reading at the moment: Traders, Guns & Money. It's full of highly amusing (semi-fictional) anecdotes (tales of disasters etc.) from the derivatives world and it's also surprisingly informative on various derivatives themselves. It reads almost like a thriller. If you're from that world, I'm sure you'll find it hilarious and entertaining.

MoMoney.
 
Quote from riskarb:

His target and stop was the $premium on the delta straddle // atm straddle; i.e., the delta straddle trading at $36.00, and the atm at $30.00. His target and stop was = $6.00. He would lock or offset if any futures/spot or option hedge that resulted in a $6.00 loss. Or simply a 6-handle loss on the underlying combo as the result of g/d and/or vegas. Certainly there would be times that a 1:1 risk was not achievable, but tempered by the large number of trades in which the combo was allowed to run in his favor.
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Gotcha, thanks.
 
So, presumably BoM (betonmarkets.com) will be affected by the US government rescuing us from ourselves by banning online gambling. Is there a (SEC? CFTC?) sanctioned exotic trading venue?

hedgestreet.com has binaries, but that's it.
 
Quote from FullyArticulate:

So, presumably BoM (betonmarkets.com) will be affected by the US government rescuing us from ourselves by banning online gambling. Is there a (SEC? CFTC?) sanctioned exotic trading venue?

hedgestreet.com has binaries, but that's it.
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I've heard they're not impacted. Only "games" of chance. HS would be out of biz if your presumption is correct.
 
Quote from FullyArticulate:

HS is regulated by CFTC and US based, so presumably they've covered their bases. :-)
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Yes, but the product offer is nearly identical to BOM's digitals. In fact, HS' are far more gambling oriented with the daily expirations. I don't believe there is any mention of asset-based bets in the bill.
 
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