Large(ish) Estoxx flow today...

Thanks for all that help.

Mark

 

Mark,
I am disappointed with your response. I gave you the details of a particular trade in my initial post—then you gave me a long-winded reply, but without looking at the actual details I provided there.

Here is some data of a particular trade I pulled from trade-alert.com. You might want to also know that the OI for the14 strike was 7621 and for the 10 strike was 17,829. Also, let say that over 90% of the buy leg was executed at the ask and over 90% of the sell leg was executed at the bid. The trade was executed as a one-block speared at 10:07am.

Quantity Symbol Expiry Strike Type Price Side Exch. Time Volume Spread Ivol Spot Change Close Link
18500 XLF Jan11 14 Puts $2.47 ASKSIDE 10:07:08 18500 SPD 39.12% 14.10 -0.23 $2.41 detail
18500 XLF Jan11 10 Puts $0.84 MIDMKT 10:07:08 18500 SPD 42.21% 14.10 -0.23 $0.83 detail

If you just have paid attention, read through the given information you would have realized that actually, there is much that can be said. That was the my reason for listing all these question—to ‘force’ the reader (xfalt or you) to go, step by step through these questions and summarize this way your more educated ‘findings’ :

Well--let me help you a bit.

1) Do you think this was an opening trade, or a closing one?
[MARK] Thus, to reply to your question, there is no way to determine if it is an opening trade or not - despite your willingness to be helpful.
[BBen] Look at the disclosed open interest reported on that day—can you now determine if it is an opening trade or not?

2) Was it directional or not?
[MARK] The trade was directional, but unless you know the hedge, if any, you don't know if the 'play' was directional.
[BBen] I did not ask about the trader’s intent

3) Was it placed for credit or for debit?
[MARK] Asking this question was not a good idea. A put debit spread is the same as the corresponding call credit spread, so the customer could have chosen a debit or credit spread and still own the equivalent position. If the customer can choose either, and the trades are essentially the same, how can it possibly make a difference as to whether it's a debit or credit? I'm very disappointed that you believe it makes a difference.
[BBen] Now, can you tell from the given info the puts were used (and oh, I never said there is a difference).

4) Can you infer what direction the placed trade was leaning? (bullish or bearish in its disposition, though I am not asking about trader�s intent)?
[MARK] It's far from delta neutral, so the answer is 'yes.'
[Bben], if so, then which?

5) Under what circumstance a trader (such as yourself, say) would put on such an exact trade (you may re-scale delta if desire)?
[MARK]None. But if I were forced to do so, i would find a hedge that flattened out my Greeks as much as possible.
[BBen] Yes Mark, know you seldom take directional bets—but can’t you even open your own book to find those circumstances that would warrant the consideration of such a directional bet (without really speculating on the hedge)?

6) What has to happen (between now and the expiry) for this trade to be profitable? (you may speculate on trader�s intent as you wish)
[MARK] Are you testing to see if we know whether XLF is the bullish or bearish index? that's a bit childish. the truth is that I am responding to your questions without knowing what the trade is. It was in XLF, but I have no idea whether the trade was using calls or puts or whether it was a debit or credit. I did not look at the trade because your questions can be answered without knowing any details.
[BBen] Perhaps you should have looked as the given trade information prior to answering my questions!

7) If your contention of a pre-arranged speared price is correct�what is the perceived odds the trader has for success�at least with the given 2011�time horizon?
[MARK] Unknown. When shopped off the floor, the other side of the trade is not an ignorant individual investor who is taking a stab at a trade. the 'other side' is just as sophisticated as the originator of the trade and already has the planned trades to hedge the position ready to enter.
The buyer and seller each perceive an edge to the trade. Each thinks he is making a trade with a positive expectancy. That's why trades are made. I have no idea what the probability is the the originator will have a profit. And neither do you.
[BBen] I only asked you about the perceived odds for success the trader has (not the MM) –and you definitely know now how much she paid for this 4 points spread.

8) For the given information�what is the volatility implied for each of the strike (by the trading prices) and what is the �speared IV�? (you will be also able to check if the given IV figures are meaningless or not)
[MARK] I know how to calculate the IV of an option. I can use a calculator, so I decline this specific challenge. But remember, the prices chosen for the trade may be arbitrary. And that significantly changes the IV of each leg. For you to fail to recognize that IV in this case is immaterial is also disappointing, since you are very condescending with this post. But that's ok. I can take it.
[BBen] Yes, I know you know—but this was primarily offered to xfalt per his comment on the IV (and again—just using the given trade information).

So Mark—would you like to try again, but now, going through the actual trade information I provide, prior to professing your (uninformed) opinion?
Please remember, the entire purpose of this exercise was to point out that some type of information could, under some circumstances (surely not all) still be useful.
And as for me being condescending – I apologize—I meant only to illustrate to you how sometime you yourself come through (and most of the time needlessly so).
BBen

 

Mark

 

Well mark, I meant to be instructive to you (please see my initial post) and I am pleased you were receptive.

However, I was puzzled by some of your 'so-called' answers above which suggested a major gap in your understanding of basic notions relating expectancy, odds/probabilities and the pricing of options—after all, you do represent yourself on this board as an authority and as an educator—so please take a moment to clarify these basics concepts for yourself. Similarly, I hope you will review your comment concerning OI and the block –size of the option being traded.

Take care,

BBen

 

Sorry Ben but your reply to your own question is so subjective like the data and the question itself it is of no particular value. That combined with your attitude, although it may make for some laughs for us, does not change the fact that simple statement of price and volume in options trades does not give anyone any particular useful info.

 

18500 XLF Jan11 14 Puts $2.47 ASKSIDE 10:07:08 18500 SPD 39.12% 14.10 -0.23 $2.41 detail
18500 XLF Jan11 10 Puts $0.84 MIDMKT 10:07:08 18500 SPD 42.21% 14.10 -0.23 $0.83 detail

I don't want instructions from you. Truly, you may think you were being helpful, but I found our correspondence to be distasteful.


I have NO IDEA why you think the data you supplied provides the information you claim.

Where is there any mention of OI?
I cannot find any.


I represent myself as an experienced trader with expertise in the ability to uncomplicate options. I explain the basic concepts and strategies so that beginners can readily understand how to use options successfully.

I take the time to respond to very basic questions. I don't talk down to the novices. I am patient with them.

I am very good at what I do.

I do not claim the ability to teach graduate level courses in option theory.

Mark

 

Mark,
I understand, but please take a look at my original post www.elitetrader.com/vb/showthread.php?s=&postid=2542201#post2542201, where it was stated:
Here is some data of a particular trade I pulled from trade-alert.com. You might want to also know that the OI for the14 strike was 7621 and for the 10 strike was 17,829. Also, let say that over 90% of the buy leg was executed at the ask and over 90% of the sell leg was executed at the bid. The trade was executed as a one-block speared at 10:07am.

Quantity Symbol Expiry Strike Type Price Side Exch. Time Volume Spread Ivol Spot Change Close Link
18500 XLF Jan11 14 Puts $2.47 ASKSIDE 10:07:08 18500 SPD 39.12% 14.10 -0.23 $2.41 detail
18500 XLF Jan11 10 Puts $0.84 MIDMKT 10:07:08 18500 SPD 42.21% 14.10 -0.23 $0.83 detail

In any case, I am done with my illustration.
And oh.. just for the record, to me, the value of the information gathered from the order flow (volume, etc), is exactly on the same footings as the (value of the) information gathered from a technical analysis…

Hopefully, your trading today was better than mine.

Take care,

Bben

 

It never occurred to me to search out the first post. When you provided data in a later post, I had no reason to assume the information was incomplete.

Yes, my results today were outstanding. That's no big deal - I didn't do so well at the end of the rally, so this compensates.

Mark