yeah,when i worked at Salomon,no intraday hedging was the mantra..not one of those traders survived the tail moves..not a one
Sorry Risk, I'm trying to follow along but I was confused by your risk-reward statement. How did this practitioner have a 1:1 risk-reward on a short synthetic straddle? What hedge was this person using? Thanks in advance...
His target and stop was the $premium on the delta straddle // atm straddle; i.e., the delta straddle trading at $36.00, and the atm at $30.00. His target and stop was = $6.00. He would lock or offset if any futures/spot or option hedge that resulted in a $6.00 loss. Or simply a 6-handle loss on the underlying combo as the result of g/d and/or vegas. Certainly there would be times that a 1:1 risk was not achievable, but tempered by the large number of trades in which the combo was allowed to run in his favor.
As riskarb would put it: "thanks for the remedial lesson on fat tails". FYI, the post you quoted was not meant to be taken seriously (read: sarcasm) and was from some time last century. Your comments re: Salomon are consistent with a book I'm reading at the moment: Traders, Guns & Money. It's full of highly amusing (semi-fictional) anecdotes (tales of disasters etc.) from the derivatives world and it's also surprisingly informative on various derivatives themselves. It reads almost like a thriller. If you're from that world, I'm sure you'll find it hilarious and entertaining. MoMoney.
So, presumably BoM (betonmarkets.com) will be affected by the US government rescuing us from ourselves by banning online gambling. Is there a (SEC? CFTC?) sanctioned exotic trading venue? hedgestreet.com has binaries, but that's it.
I've heard they're not impacted. Only "games" of chance. HS would be out of biz if your presumption is correct.
Yes, but the product offer is nearly identical to BOM's digitals. In fact, HS' are far more gambling oriented with the daily expirations. I don't believe there is any mention of asset-based bets in the bill.