Sold NT to close position at $465,500... Modeled at $480,000, but pointless to hold for a week for $34k in decay and possible reversion. I would hold if the synth were traded strong and allowed a b/e or better at the barrier. Offset 80 futures at 1276.00 avg. Page 56 1232.00 no touch: +$171,500 Futures hedge: ($115,300) Page 58 blotter tally: ($91,175) Journal blotter to date: ($34,975) ... flat positions. [journal blotter 4]
Hedge strip vols or the VBI futures? Hedging VIX exposure is hedging vega risk and smile [kurtosis] [dvega/dvol]. The lazy method would be to replicate via variance-swaps.
Risk, do you sell these positions back to the same dealer you bought them from or do you exit them via another dealer?
What's the max size you think one could execute in these kind of trades. Let say you're managing a multi-billion dollar fund and need to take large positions. Would this be feasible? How big can you get? Thanks, risk!
Yes, unless they're intent on marking it heavily against me. They know that I have an FV estimate that is spot-on, but it doesn't preclude an attempt to make a ridiculous market. The biggest disadvantage to a dealer-market is being known. I can cover with any of the three I use, but would prefer to keep it clean.
I really haven't a clue. Many of these position are priced egregiously; higher notionals are often linear with w.r.t. poorer fills. There isn't a ready-made replication and it takes some calls. Often they'd rather not take the opposing side. They will deal, but at what price? The answer is a market so advantageous that the dealer is certain of a profitable offset with one phone call.
Thx. If you offset via another dealer do you encounter increased margin usage on your portfolio as this will now be considered as a NEW POSITION to this dealer. Or is there some prime brokerage mechnaism for exotics to net offsetting portfolio positions. I think I read somewhere that Godlman offers this service. Are you aware of this? What do you do?