Risk, As always thanks for sharing. I am curious why do you seem to profer the DNT (double no touch) barrier as opposed to the range option i.e. where you collect payout as far as the asset closes WITHIN the range. I kow the gearing is less with the range option, but so is the risk. This is not criticism, just curious as to your thinking process here. Thanks again.
oh ok that makes sense...I know you were not actually down but up the 91...it was the brief hit I was alluding to but understand now thx...enjoying the journal even tho understand precious little
Digitals are much more difficult to hedge and model as you approach expiration. I will be trading some on this journal, but selectively. The sub-account I manage produced >180% in the last 10months with a >4.0 Sharpe and largest monthly DD of 11.9%. >90% of the trading involved binaries; singles[synth combo], and double barriers. I can't remember making money on a single digital play. It's highly likely that a digital will go OTM at expiration if it's close to the strike, but often at twice the debit of a comparable binary. I can hedge the risk with a barrier, but a digital requires too much hedge-risk on the replication... barriers get a bad rap, but you get what you pay for. I'll also be playing some up/down and out calls, puts and combos.
Just for amusement Riskarb, what would the bet be on the 1190/1320 for 6/14/06? How much moola do you have to put in play to get someone's attention?
u ever take advantage of the midnight rally by selling puts late in the afternoon and buying them back the next morning??? (in the stock indexes)