Very high ratio between V-Dax and US VIX this morning , almost 50%. Would you consider an exotic DAX-SPX correlated bet at this point ? BOM shows 27$ to win 100 on 5297/14d NO Touch and only 18$ to win 100 on 1217/14d Touch on SPX. Both 5297 and 1217 are exactly 3% below the current prices. Thanks , B Notice that the bet's premiums carry the same as vols 50% ratio
Equity Default Note Offered To U.S. Retail 06/13/06 Morgan Stanley has structured a portfolio of deep out-of-the-money equity put options on North American corporates which offers investors a high return, providing most stocks remain above a barrier and the corporates remain solvent. It is being marketed to retail investors through Morgan Stanley distribution channels, and--although structured through options--it is designed to mirror credit-default swap portfolios. According to a prospectus, the notes pay out five times capital invested providing no stocks fall more than 85% and none of the referenced companies have gone bankrupt before close of the portfolio September 2013. If a trigger event occurs on one stock the return is four times capital invested, three times for two trigger events, and twice for three events. Capital is not protected but initial investment is returned if there are no more than four events. The 100 names in the portfolio include firms such as MetLife, Sprint Nextel Corp., Goldman Sachs and Time Warner. An equity market observer familiar with the offering noted it is similar to structures sold by IXIS Corporate & Investment Bank, JPMorgan (DW 11/24/04) and Credit Suisse (DW, 11/11/05), but the loss trigger is higher and it includes a definition of bankruptcy. In other deals, the equity event trigger was set at 65-70% of initial value and there has not been a provision for bankruptcy of referenced companies. He also noted, however, these structures have not yet been offered to retail clients and it is not clear how much demand Morgan Stanley will see. Officials in Morgan Stanley's structured products group in New York declined all comment. © 2006 Institutional Investor
That's as high as it's been. Stands to reason with the drop in vols on this run to 1250. I got burned on that recent replication; short gamma in DAX, long in SPX. I'll take a look at it Monday morning, thanks IV.
sounds like better odds than a normal touch/barrier near the freakin money...and this stays alive 'till the stock touches -85%, R0R. no way retails are gonna see deals like those.
Looks like 25% PA to me if there are no adverse events. What's the bankruptcy 85% drop frequency on an member of the SP 100 I wonder?
THis is not too dissimilar to what I am trying to do with the deep OTM SPX put credit spreads. Buying OTM VIX Calls as a hedge for a huge downturn type of event where the VIX will spike and the calls will have some movement higher. Risk, if you have a deep OTM put no touch strike, go long a certain amount of VIX OTM calls with expiration just past the exotic expiration, and short a smaller number of ES contracts you might have a different cobination of hedges to play with... Somewhere buried in this thread I bought 10 VIX AUG 15.00 Calls with the VIX around 16 or so for $1.75 (there is some discounting/Euro style). When Vix was over 21 I sold them for $4.30. If you have, let's say a $400,000/$900,000 made up exotic, you could spend about $40K on VIX calls- let's say 1000 at $0.40. If the market has the same move lower and VIX and the calls move $2.55 as before, you make $255,000 plus profits on the ES hedges as well. Not the VIX calls work better for quick drops in the index and moves in IV and the ES hedges will help you for slow bleeds lower. WIth the VIX calls though you could sell the next higher stirke on large moves nad keep rolling higher taking in premium. Then you would have a series of bull call spreads for low cost on sustained moves and larger profits on the VIX hedge in certain scenarios while the ES shorts will still hedge the move as well. WIll take some number crunching to estimate amount and quantity but thats what you do
man, gs goin close to b/k? R0R, i put a bln dollars bet it doesnt and with such a close exp. free $$$ man.
OC , agree , spead of drop is important. That why I'm thinking of taking position for a shorter time period (7-10 days). Also , if one of his posts Risk pointed that house edge for initial position should be = one day of time decay. Don't like double No Touch(too much of house edge), I'm directions clueless trader ( not sure if its a bad thing ) , rather stay with vols cycles , so No Touch with VIX hedge make sense for me.