@destriero this thread inspired me to investigate variance swap. Thanks for inspiring us. Quick question. Why is PM account required? Without knowing much about modeling swaps, aren't you long a swap and short another one?
skew locks
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No it's all optionality and it's additive under TIMS. Obv RegT arbitrarily treats each component independently. These are cheaper to trade than a box.
The two singles shown (arrow) at 0.00 are lit, but no impact to BP. I've taken these to nearly $100K vega on index for less than $100K haircut.
That is very impressive. I need to learn about BP effect under PM.
Regarding the following excerpt from Eifert's text that you posted,
a short position in one market and an opposite long position in another market that allows you to generate returns based on how those values move relative to each other. Traders call it "skew locking" because they are literally locking up profits against their positions by hedging both sides at different levels with the same underlying instrument or asset class.
it seems to me that first sentence is telling us to have a spread between two similar assets. Then the second one says that the spread is on the same underlying. If I am not mistaken about TOS, the risk profile does not allow you to see positions on two ULs. I have to guess that the second sentence is probably true and that's what you are modeling. It would make more sense since I see that you are doing these on SN as well. Otherwise, how would you match up another position with SN? Using a ETF or as a ratio of SPY?
Thanks.
Thanks for the clarification.
Sure. The trade works when a normalized skew figure is seen (skew model/ATM vol-line). The gigi is in the skew model. I heard it in passing on an FX Majors/vol-desk (pre-EU) when I was in my early 20s and have applied it to eq-index and SN vols. The structure itself was found while I was tinkering with combinations while trying to reduce the haircut figure to something approaching a box/conversion arb while adding vega.
I had an index SL on two CPIs ago and the variation margin was $72K and the position earned $75K on the news. I have a complex order book position but I don't trade it as a COB as it would be reverse engineered.
I had an index SL on two CPIs ago and the variation margin was $72K and the position earned $75K on the news. I have a complex order book position but I don't trade it as a COB as it would be reverse engineered.
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