No I was a market maker on Euronext for 5 years. So I know what I am talking about. That you never had a losing week, well thats good for you. But trading the skew is a pro game or you must have a very big wallet. Doing credit spreads and taking advantage of the skew like optioncoach does in his journal is a way to use the skew but he doesnt trade the skew. But if you made money with your interpretation of the skew thats fine and I hope you will make a lot more, but dont try to teach somebody else ( the thread opener) things wich you dont understand completely yourself . Thats why I reacted and really not to offend you.
Volatility skew
- Thread starter DeltaDelta
- Start date
No I was a market maker on Euronext for 5 years. So I know what I am talking about. That you never had a losing week, well thats good for you. But trading the skew is a pro game or you must have a very big wallet. Doing credit spreads and taking advantage of the skew like optioncoach does in his journal is a way to use the skew but he doesnt trade the skew. But if you made money with your interpretation of the skew thats fine and I hope you will make a lot more, but dont try to teach somebody else ( the thread opener) things wich you dont understand completely yourself . Thats why I reacted and really not to offend you.
Quote from DeltaDelta:
I know Nathenberg, and I still read the book regularly, this includes the chapter about implied volatilities and the skew. Maybe in the first post I did not express what I was looking for clearly:
When you place a layer over the skew graph containing bars of bid/ask implied volatilies, you see the market in a very effective way. If there is a mispricing thus opening for arbitrage, you see this immediately at the specific bar; as an offset of the market skew.
I just looked at the video again, and I admit this is not what they are taking about, but if you look carefully you can see all the bid/offers in implied terms..
So - I know how skews work, now I am just looking for software tools
There is almost never a mispricing by a market maker. Been there done that lol. If you see an opportunity than its almost always an order of someone that the market makers didnt want to trade. And to take advantage of a mispricing you have to do the trade delta neutral otherwise you are "gambling" on the direction of the stock. So I am just curious how you want to trade these mispricings or opportunities?
Merc77: But why would a market-maker, who is presumably looking right at the options on a particular security, leave a big theoretical value edge on the table and not "want to trade" an option?
Bro, how do you trade options without having a losing week?
I was just posting my opinion (read my first post) , and didn't try to "teach" anyone , looks like you the one that doing it. But if I will want to , I will sure not going to ask your permission. Now , back to assumptions/interpretations : should I assume that you was fired from your MM job ? Maybe because of your arrogance and poor performance ? Just guessing here.
I traded options as a MM for 5 years so if I was really that bad do you think I could last that long? But I dont want to start a fight because there are to many on this board. Just keep doing what you are doing and I hope profits will keep coming your way. The only thing I said is that trading the skew and the skew difference between different expiration months is very hard to trade for retail traders because of the costs and is most of the time a "game" for MMs and large institutions etc.