Trading the vol surface

CashDelivery said:
what you have said thus far is fairly generic and obvious. lets get into the meat of the matter. what kind of vol dynamics are you using.
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What do you want.. do you want me to fully explain how options market makers trade and make money?
 
CashDelivery said:
what you have said thus far is fairly generic and obvious. lets get into the meat of the matter. what kind of vol dynamics are you using.
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It really depends on what you are trading. Single names are mostly fixed strike, with some beta-seepage. Index is usually some form of beta-vol (variations of lognormal SABR).
 
And on top of that you trade on gamma to capture the difference between IV and realized vols.

You can trade a dispersion strategy... Index vs Singles
 
sle said:
It really depends on what you are trading. Single names are mostly fixed strike, with some beta-seepage. Index is usually some form of beta-vol (variations of lognormal SABR).
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The SABR model looks very interesting and S&P is an appealing product. For single names, I don't understand what you mean by fixed strike, beta seepage. Can you clarify? Thanks.
 
>> what you have said thus far is fairly generic and obvious. lets get into the meat of the matter. what kind of vol dynamics are you using.

Well, that's most likely because they never did that actually in a professional setup so are just repeating common memes.

I worked for a while for guys who did that and obviously I saw what they did but noone ever explained me *why* it works. I'm fairly certain they didn't know either, further reinforced by the fact that when they started losing they were unable to figure out what's wrong and adapt.

Generally those who know do. Those who teach, don't.
 
Well, one of my favorite jokes is this. A teenager goes to his rich dad and says: dad, I'm going out with the guys, gimme some money. Dad says "well, go to the safe and take some". Kid asks: "ok, how much should I take?". Dad says: "a couple of inches".
 
Aquarians said:
>> what you have said thus far is fairly generic and obvious. lets get into the meat of the matter. what kind of vol dynamics are you using.

Well, that's most likely because they never did that actually in a professional setup so are just repeating common memes.

I worked for a while for guys who did that and obviously I saw what they did but noone ever explained me *why* it works. I'm fairly certain they didn't know either, further reinforced by the fact that when they started losing they were unable to figure out what's wrong and adapt.

Generally those who know do. Those who teach, don't.
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And you as a programmer knows this because...?
 
Unlike the other programmers, I asked myself "why" and made 1,000 experiments to understand how this works.

Now, I'm exactly in Edison's position, "I have not failed. I've just found 10000 ways that won't work" :)
 
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