heard bank traders are selling vol and delta hedging...

Discussion in 'Options' started by mizhael, Jun 1, 2011.

  1. any thoughts?
    for example, crude oil traders are selling vol on crude oil...
  2. Suppose that your proposition is true. How would you trade to take advantage of it?
  3. And? What's the question?
  4. Could we just skip to the answer?
  5. heech


    I heard heech is having Mexican for lunch.

  6. heard bank traders are cashing miles and flying delta...
  7. You referring to the food or Ines Sainz?
  8. The difference between them and you, is this what you want to know? Like, could I just go surf in the morning, nap during the day and simply do my delta hedging at the close and profit from it? The answer is most likely not. Why? Transaction fees (institutional rate vs retail). This is the only difference between them and you, period. I call this comish arbitrage. Guys in banks think they are genius doing this or arbing some futs versus the cash. Their profit on average is smaller than the comish we pay as retail so there is no way we can do it and there is no way they can do it at home.
  9. question maybe how to profit from it assuming that bank traders know something.
    The way to sell volatility is sell straddles and strangles. But todays implied volatility in crude oil was about 30. yearly high/low was 42/25. Since it is in the low 30% of volatility yearly range (closer to yearly low than high), I dont think it may be a very good move.
    #10     Jun 1, 2011