Bought >100 GOOG Oct 280/300/320 butterflies at 4.60 on ISE. Some were calls, some irons. Debit risk of 4.60, obviously the iron was done at a credit. Will follow-up, but won't be reflected in exotic blotter. Ursa's misgivings about legging flies has me buying outrights! [Just kidding my friend]
I thought replication would be cheaper over the longer run than dynamic, but maybe not. I'm just scratching the surface on exotics. I had to break out an old text book to refresh(Hull). But he only has one little chapter on this. I need a more thorough text. Anyway....good work. Good journal. BTW: you're up on your hedges too?!? Didn't anyone ever tell you that you're suposed to lose money on your hedges? ;-)
Replication is bounded-risk, so it may very well be cheaper in the long run -- a "pay me a little now, or a lot later" scenario in trading futures against the gamma position. There is some advantages to trading discrete deltas in spot/gamma. I can offset my hedge prematurely into fixed-risk, due to the null-gamma beyond the barrier, and know that my risk is bound to the strike. On the previous SPX barrier, I sold my long ES hedge with cash at 1236+ with a barrier at 1238 basis cash, which covered a majority of my debit risk on the barrier. Market reversed and traded to <1233, which allowed for another opportunity to get long into the barrier. Yeah, I haven't broken-down the numbers on hedge/primary, but off-hand I'd say that 20% of the gain is attributable to hedge.
Hammered on the Koizumi mandate. Sliced through the upper barrier on the Nikkei open. I had no idea the election was in view when I traded the double, live and learn. Won't happen again. Exotics blotter: +$137,200
Sold the 200 vanilla straddles at 60.80 at 7:00 - 7:15 EDT this morning. Lost a bit on currency as well; the rationale for the offset -- I don't see the risk on the Dax double > the decay on the vanilla. Sold 20 of the ES futures hedge at 47.50... with the idea that the Dax double will be inviolate, and wanting a little short-delta here in SPX with the Dax position at neutrality. Will be doubling my exposure, even in light of my recent performance. Exotics blotter: +$102,300 Open Positions: DAX double; SPX double; long 50 Dec ES futures
Nikkei double barrier no touch -- 12,250//13,250 Premium: 30,240,000Y Payout: 50,000,000Y [includes prem paid] Expires: Sep 19, 2005 Negative edge: 3,700,000Y Biggest since inception of journal. A bit of a Hamlet-esque revenge trade. Solid vols trading post-Koizumi victory. Expect some downside over the next few days on Nikkei cash due to general malaise expected in world index markets this week.
FWIW, My Witch tells me that the stock market top will happen on around September 23rd. My Witch has made me money on balance. Sometimes big money. Just thought I would flip this out to you guys.