Very Dubious Pricing of Copper Options

comintel · Sep 7, 2011

Actually on second thought I deleted that (although I pressed the wrong button to do so on the first try) and you're welcome to delete the quote of it too if you want.

I do like your term: "demand for the wings".

I agree that is a very real phenomenon.

It seems that it is irrational to a degree and could be exploited by some systematic strategy.

comintel · Sep 7, 2011

Quote from atticus:

No, I never touch 'em, but we're talking about you.... your level of experience necessitated a wake-up call from Jeb on the fact that you were down 50% on marks when you thought you were profitable.

On marks alone yes ......I do not think you can go by them 100% though, especially for out of the money options in illiquid markets

atticus · Sep 7, 2011

Quote from comintel:

On marks alone yes ......I do not think you can go by them 100% though, especially for out of the money options in illiquid markets

They're using a vol-strip and manufacturing a curve based upon the aforementioned. They use cspline.

comintel · Sep 7, 2011

Quote from atticus:

They're using a vol-strip and manufacturing a curve based upon the aforementioned. They use cspline.

Do any of the options software packages have that in them?

atticus · Sep 7, 2011

Quote from comintel:

Do any of the options software packages have that in them?

Sure. It's simply one interpolation method. Perhaps you can ask the guy you picked-off what he uses.

comintel · Sep 7, 2011

Quote from atticus:

Sure. It's simply one interpolation method. Perhaps you can ask the guy you picked-off what he uses.

Sarcasm aside, if anyone knows of some software packages that provide some good insights into modeling options prices on metal and energy futures options, and rationalizing them against settlement prices, please post.

Mainly OptionVue? ThinkOrSwim?

My post was definitely *not* intended to be about one minor trade, which was only an illustration that ended up being poorly chosen. I am sorry I mentioned it at all. Please forget it.

I do see numerous anomalies in option pricing of out of the money options in less-traded futures. Is anyone systematically exploiting those by acting like a market maker but on a small scale? Obviously one could use delta-hedging etc. on one's overall portfolio to hedge the risk.

atticus · Sep 7, 2011

Quote from comintel:

Sarcasm aside, if anyone knows of some software packages that provide some good insights into modeling options prices on metal and energy futures options, and rationalizing them against settlement prices, please post.

Mainly OptionVue? ThinkOrSwim?

My post was definitely *not* intended to be about one minor trade, which was only an illustration that ended up being poorly chosen. I am sorry I mentioned it at all. Please forget it.

I do see numerous anomalies in option pricing of out of the money options in less-traded futures. Is anyone systematically exploiting those by acting like a market maker but on a small scale? Obviously one could use delta-hedging etc. on one's overall portfolio to hedge the risk.

Seriously, this thread is a cautionary tale on how not to approach a market. You want the abridged version? Come back to us when you trade a long vertical at even money or better (credit). That's an anomaly.

ogarbitrage · Sep 9, 2011

Quote from comintel:

Sarcasm aside, if anyone knows of some software packages that provide some good insights into modeling options prices on metal and energy futures options, and rationalizing them against settlement prices, please post.

Mainly OptionVue? ThinkOrSwim?

My post was definitely *not* intended to be about one minor trade, which was only an illustration that ended up being poorly chosen. I am sorry I mentioned it at all. Please forget it.

I do see numerous anomalies in option pricing of out of the money options in less-traded futures. Is anyone systematically exploiting those by acting like a market maker but on a small scale? Obviously one could use delta-hedging etc. on one's overall portfolio to hedge the risk.

Are you seeing these 'anomalies' in settlement prices only or in the live bid/ask?

Settlements are a joke and 99.9% do not represent where the real market is.

atticus · Sep 9, 2011

Quote from ogarbitrage:

Settlements are a joke and 99.9% do not represent where the real market is.

That statement is complete unsubstantiated BS.

ogarbitrage · Sep 9, 2011

Quote from atticus:

Quote from comintel:
I'm curious, do you even trade options much?

More...

No, I never touch 'em, but we're talking about you...

Quote from atticus:

Quote from ogarbitrage:
Settlements are a joke and 99.9% do not represent where the real market is.

More...

That statement is complete unsubstantiated BS.

Said the guy who doesn't trade options.