Forget 2010, let’s go 2011
We’ve been trading 2011 options for a while now, and it’s a good thing we’re finally moving on to the new year and leaving 2010 behind us. It wasn’t a great year for many firms, with most well-known casualties All Options and Alphabay. The first is seriously downsizing in both office space and headcount, and Alphabay was forced to pull their quotes altogether within a year.
Brokers in vulnerable position
Operating against unmistakably lower costs are the voice brokerages like Aespen, AFS, IWb and Amstel. A coffee machine, a phone line and a couple of smooth talking brokers is all you need (and a few rounds of beer now and then). But wholesale trading is thin, and spreads on the screen are tight enough at times to bypass the brokers altogether. Although we all know brokers are always lying to the traders – joking aside, I hope all brokers will manage to survive.
IMC posting record profits
Another firm which hasn’t been very popular in the comments is IMC. Agreed, reducing your workforce on bonus-day doesn’t help much winning the popularity contest. Nevertheless, we’re all in for the money (and the thrill of the game) and that’s a distinct point of difference between IMC and All Options last year. IMC got rid of a few dozen traders because they were made redundant as their famous electronic trading systems do actually function properly. Their 52.000 square feet office space in Chicago’s Sears tower is filled with rocket scientists and other quants. Their new style of (semi) automatic trading in options has been ignited over there, and most of the revenues have come from the USA as well – and a portion in Amsterdam too. Ignore negative comments on IMC’s profits – they did fine. Actually, they have been doing better than ever before. Former record year amounted around 60 million euros, my market for IMC in 2010 would be 70 bid at 90. Beating the 100 million hurdle in a year like this sounds too far-fetched.
Expected developments in 2011
Apart from a possible new wave of jobcuts at IMC, there are some serious matters expected.
- Whether or not the new bonus regulations will apply to market makers as well – news expected soon
- Court ruling on allegedly stolen trading software between Optiver versus Tibra
- Sanction for Optiver imposed by the CFTC for whacking the oil price back in 2007
- Official investigation in the Van der Moolen bankruptcy case
Almost forgot – best wishes to all of you, and for the Amsterdam traders and brokers don’t forget to visit the NYSE Euronext New Year drinks this Friday in Krasnapolsky. Euronext is an expensive and slow government-like company, but there’s nothing wrong with their receptions. Cheers.
first comment on the first post of 2011
damned my life is great : )
Happy new year richard den drijver !
i dont understand why there is a perception that ‘Alphabay was forced to pull their quotes altogether within a year.’
Alphabay was just a front for Egbert & Co to steal 3 mil dicount from VDM and then once 6 month had passed, just sell the book onto somebody serious .. its not like they seriously gave it a shot .. no other VDm offshoot had such a fall from grace like Alphabay .. it just a front to steal VDM’s money like money launderers do when they go to casino, place a few bets and then cash out all the 97% cash back as clean money ..
‘ I hope all brokers will manage to survive.’ .. what value are they adding .. apart from sucking up whatever little is left in market making biz
aplha bay was set up purely to take xmm euros from vdm through inheriting the positions. it was never the intention for the business to stay open for longer than 9 months
u realised that now, it should have been obvious when they suspiciously closed shop so soon after starting with 3mil discount when nobody else threw the towel even without discount ..
2011
the year that NYSE-Euronext is finally gonna cut its costs for the options with a 1-cent ticksize
they finally realise volume*cost is what they have to maximize, muppets !
Are there really plans to cut costs ??
Does anyone know which company is going to rent the old trading floor, beursplein 5?
ABN or a bunch of small MM’s
“A coffee machine, a phone line and a couple of smooth talking brokers is all you need (and a few rounds of beer now and then). But wholesale trading is thin, and spreads on the screen are tight enough at times to bypass the brokers altogether.”
What a load of bollocks. Might be true for the Dutch brokers, but only because they’re doing it wrong. The top 5 equity derivatives brokerage houses all have major operations, hundreds of people, business plans focused on diversification, multiple product offerings, research, sales etc. So if you want to play ball with the boys and make serious cash you have to have an infrastructure to assist you. But most of all: you need clients who give you business on a daily basis. Dutch brokers don’t have clients, they have marketmaker buddies. I sit opposite a guy who makes on average €10,000 in brokerage a day in single stock options. He gets to keep 65% of that.
He ‘manages to survive’.
Wholesale trading thin? You must be kidding me. Again, this has to do with Dutch brokers who don’t have clients. Wholesale trading is not thin here. Believe me. Everyone ‘manages to survive’.
And the only people who bypass brokers are marketmakers, because marketmakers are the only ones that really care about screen margins. A bank that has to do 50m USD notional in one trade doesn’t care about margin and he knows the only way he’ll get it done is through a broker. A marketmaker won’t bypass you if you have a relationship with them and lift them above their offer once in a while or give them a trade that no one else has seen. If you’re being bypassed by someone, you as a broker are not doing your job right.
End of lesson. You’re welcome.
@ The top 5 equity derivatives brokerage houses all have major operations, hundreds of people, business plans focused on diversification, multiple product offerings, research, sales etc. So if you want to play ball with the boys and make serious cash you have to have an infrastructure to assist you.
I sit opposite a guy who makes on average €10,000 in brokerage a day in single stock options. He gets to keep 65% of that.
So $3500 a day for the company to cover ALL THE OVERHEAD + a PROFIT?!
while your buddy gets $6500
I heard Leopark will rent the floor Beursplein 5.
@ bollocks!
January 6th, 2011 at 2:17 pm
we have over 100 brokers in the london office, they all make money, not everyone is on the same % deal (ranges from 30 to 70), not everyone takes a salary (most brokers are on a draw – their basic comes out of their bonus, some brokers don’t take a basic at all).
so yes. we quite easily cover all our overhead (no need for caps). the company even takes care of most the T&E.
you were saying?
oh yeah next time you quote someone, don’t omit parts that are essential to the quote (“But most of all: you need clients who give you business on a daily basis. Dutch brokers don’t have clients, they have marketmaker buddies”).
you’re welcome. again.
If your 10k is the rule rather than the exception, why would (of course my universe of contact details is limited) the majority of people I talk to prefer the job of a trader to that of a broker? I am not questioning that this guy makes that kind of money but the interesting part is what can you reasonably expect to make if you start your career in trading or brokerage. And for those who are in it for the money (yes, I know there are people in it for the intellectual challenge, bla), trying to get into brokerage would be the preferable solution, wouldn´t it? Even if you make good money as a trader (for your employer), you most certainly will not get a comparable deal. So the amount of money in your account should be bigger taking the broker career path?!
LBB has called it right and it’s about time that some of you Dutch guys saw that there is a very large market outside the small world of trading 100 lots on screen for 2c edge and believe you’re master of universe.
One Netherlands-based Aussie MM has decided to ignore the IDB market altogether and concentrate on hitting for these 100 lots on screens as the brokers are a distraction. Laughable really.
@7:44, yes brokering has been a far better career choice than market-making for at least 3 years now and will be for the foreseeable future. If that comes as such a surprise to you then that says more about you than it does anything else.
brokers are nothing more than glorified bloomberg forwarders. No value add
yet still probably making more money than you.
doubt it
ppl see a trader as smarter/perception of making more money. not true at all
Thanks London Based Broker, that’s a good point you’re making. Dutch brokers are indeed small and local. And very dependent on a few (French) banks. Brokering for ICAP is a whole other story.
Brokering between big banks may be generating profits, but with the firm’s big client list and order flow that’s not really your own work.
I trade with my own money, hitting 100 lots in the screen with 2c. Perfectly happy with that.
@ anonymous
January 6th, 2011 at 7:44 pm
I don’t know why that is, but probably because your ‘universe of contact details is limited’. I receive CVs on a daily basis, from students, traders, IB sales traders etc. Very diverse. Why do you think a lot of ex-traders have become brokers? Not for the intellectual challenge. For the money. FYI I once got into finance because of the intellectual challenge but when I received my first bonus (14 years ago) I quickly dismissed that challenge. But after all these years at this point in my ‘career’ I value workplace, atmosphere, colleagues and the challenge more than my paycheck.
@ anonymous
January 7th, 2011 at 12:03 am
You are right to a certain extent. A lot of brokers are Bloomberg typists and indeed add no value. But you can’t generalise, clients keep coming back to brokers because they can’t do certain parts of their job without them, that means they DO add value in one way or another. End user clients (HFs, AMs, pension funds etc) should be seen in a different light then bank clients because end users DO require added value otherwise you won’t even get on their callsheet. All our brokers/salestraders who service end users pitch complex derivatives trading ideas to these people (there’s the intellectual challenge again but now for a broker! how weird) to help them manage their portfolio. I guess you can call that added value.
@Amsterdam based trader
January 7th, 2011 at 7:48 am
Mate, i’m not knocking what you do. That was someone else. I’m aware of the locals in Amsterdam and that they’re perfectly happy doing what they do. I respect you and your job and I hope you’re happy.
We don’t only ‘broker between banks’ as you put it. As a firm we indeed speak to all the banks, market makers, prop firms etc, but also to an array of about 250 end user clients. And yes they are the firm’s clients. But if our brokers don’t service them in the right way, they walk and go somewhere else. So in a way it is their ‘own work’. I don’t see the point in the glorification of this ‘own work’ point anyway even though being a broker very much comes down to ‘own work’, because if you don’t do your job, the client will tell you to stick it where the sun doesn’t shine. I respect that you value that you do your ‘own work’ but we here do it as well with a team and I value teamwork and team spirit more than I do soloists. We as a team retain our clients, we as a team make sure the clients stay with the firm. Nothing wrong with that.
FYI. I don’t work for Icap.
Last thing: I find it mildly amusing that once people on this forum don’t have anything to add to the discussion either change the subject or bash people for no reason. Just wondering why that is. It’s not hard to participate in a discussion and actually add something useful. If you can’t do that, why speak anyway?
finally some quality writing in the posts
thank you for your contribution ‘London Based Broker’!
good post LBB, i was myself an mm for Dutch based company and then changed my occupation and went into trading for a bank – so got to have an experience of working with other than Dutch brokers and i absolutely agree in almost every point with your point of view. Although i personally believe that a competent and profitable mm/trader should relatively be making more than a broker, that is just a matter of opinion. The amount of skill required for a person to deliver above average results in trading is way bigger than for a broker. I actually know a guy who went on to work as a broker to a Moscow based bank and his target for the year was to deliver around 100 mio eur in notional for a reasonable bonus (not the one you mentioned, cause 65% is just siiiick). How difficult can it be for a rookie even to deliver this size?
can we get back to trading now, less drivel from former-traders-turned-broker please
I’m thinking of becoming a broker. Is Icap a good place to work for? How about All Options?
I’m thinking that you are a retard!
go question the UWV what a good company would be to work for
London Broker guy is correct, the big brokerage houses have vastly expanded their client focused services in last 5 yrs to encompass research and other ‘value added’ aspects…why are there so many idiots on this forum who just start slagging the guy off though? Brokerage deals of up to 80% exist out there so 65% at a bigger house doesnt suprise me (although I thought 50% was more the norm for even established guys)
@ london based broker
Could you explain “A marketmaker won’t bypass you if you have a relationship with them and lift them above their offer once in a while or give them a trade that no one else has seen. If you’re being bypassed by someone, you as a broker are not doing your job right”
This point your making is not very clear, could you elaborate, thx !
10k a day, 65% is one data point, ur drawing too much extrapolation if u generalize all the brokers in that light .. i myself dont know much abt brokers, but if there was more data points, then a generalization could be tried .. icap’s annual report presents per broker compensation or something of that sorts ?
@ anonymous
January 7th, 2011 at 3:11 pm
Sure. The author of this blog wrote “But wholesale trading is thin, and spreads on the screen are tight enough at times to bypass the brokers altogether.”
My point is that a marketmaker (or any market participant) will come back to you and not bypass you if you treat them with respect and once in a while give them a bit of $$$.
Example: a while ago there was a take over rumour in an illiquid underlying. We pitched an upside callspread to a particular hedgefund client. He was interested. I called one marketmaker, he made 1.70-1.90. We pitched this so we knew the fund would be a buyer. We showed him 1.90 – 2.40. He lifted the offer in 2000. We lifted the marketmaker 0.50 above his initial offer. He was also the only one that had seen the trade and participated. He didn’t have to worry about other marketmakers rushing into to screen to hedge themselves and with that eliminating edge for all of them. Now that creates trust and a relationship. This guy will ALWAYS pick up the phone and see if he can help us out on anything. If he has something to do he won’t do it in the screen, he’ll call us – and we’ll work for him, we’re not too big for even the smallest marketmaker.
Same thing with delta differences. Today we had to buy a call which had a 0.38 delta according to my system. The 3 marketmakers on the offer all had 0.37 delta. The client saw 40 delta. The stock was 0.5% above the ref, we executed the trade with a 0.39 delta. Marketmakers happy because they’re buying more stock lower, client happy because he’s selling less stock lower.
I can go on and on. FYI i’m omitting underlyings, strikes etc on purpose here.
@ anonymous
January 7th, 2011 at 2:22 pm
50% is the norm indeed but there are exceptions to every rule (like I said earlier, the range here is from 30 to 70%). Re the 65%-guy: even if he would demand a higher percentage I would still hire him because he’s a top broker and his clients follow him where ever he’d go (let’s hope he doesn’t read this…) and he prints €€€ every single day.
There are a few brokerage houses where you can actually get 75% and upwards, but the fixed charge is very high (desk charge, Bloomberg, phone lines etc). Net you probably end up with something like 55% after National Insurance, T&E etc.
@ 2:07pm
Who’s UWV? Are they a broker or a MM?? Where are they located?
I bet the hedge fund was happy to pay 2.40 instead of 1.90 thanks to your great broking skills.
@LBB: Good points. However, while there are a lot of great IDBs (especially the ones who have been around 5-10+ years), you must agree that there are just too many of them out there at the moment and that some of the brokers will have to loose staff quickly to stay above water?
@ anonymous
January 7th, 2011 at 4:46 pm
The stock rallied 17% in two days, we bought back the delta hedge for them, so he was long a naked upside callspread. It was pure directional play, we called it right, he had about 15m EUR to invest, he didn’t care about the price. He just calculated how many options would fit into 15m EUR notional. And yes he was happy. Especially after the 2nd gap-opening two days after he paid 2.40.
@ SDS
January 7th, 2011 at 4:51 pm
I absolutely agree 100%. In equity derivatives there must be about 100 brokers present in Europe of which 40 or so are active on a daily basis. The 10 most active ones represent about 65% of total European option volumes. This implies that everyone else has a much smaller piece of the pie to divide amongst them. So yes, that means cost cutting and in my book the most effective way of cost cutting is getting rid of non-producers who are on a high basic salary. Other thing I tried to cut costs was to decrease the number of Bloomberg terminals but that was like trying to take away chocolate from a child.
T&E is Taxes & Expenses ?
T&E=Travel & Entertainment
@LBB
“we called it right”
Thats the problem with the brokers, if it hadnt been right, well then too bad for the client; mixing luck with skills; If you are so good in calling it right, why didnt u buy some for your personal account;
in all ur examples, the client is getting overcharged thru delta, higher offer, underlyings, strikes .. ur just coming and splitting that overcharge between mm and the client to keep both happy .. good value add .. i dont quite follow why your clients are so stupid to keep getting overcharged, arent they smart enough to ask around couple of mm or other brokers to see whats the fair value .. i suppose they dont care about fair value, they are big swinging dicks happy to pay over fair value .. thank god for suckers, eh or is it because u buy them lapdance later to make it worthwhile .. what a private little party based on poor investors money .. mm, broker and client all making hay while sun shines .. poor investor can die out in cold ..
understanding of nomenclature is important here, punter is different from market maker, dont call both of these trader, that misses a very profitable part of market, broker might easily make more than market maker, but for a punter, sky is the limit in terms of profitability, market maker and broker can’t even compare their potential to a punter’s potential
anonymous
January 7th, 2011 at 5:53 pm
“Thats the problem with the brokers, if it hadnt been right, well then too bad for the client; mixing luck with skills; If you are so good in calling it right, why didnt u buy some for your personal account;”
We don’t force someone into a trade, it’s the same for every investment advisor, wholesale or the guy at your local bank who looks after your investments. The advisor does not take the decision to invest, he merely puts across an idea. The investor decides whether or not he wants to do it.
Second, we’re not allowed to trade on our own trade ideas. If you’ve done any regulatory exams you should know.
“in all ur examples, the client is getting overcharged thru delta, higher offer, underlyings, strikes”
I have not mentioned underlyings or strikes (re-read my post). Nor did I overcharge someone ‘thru delta’, everyone involved in that particular trade was happy to trade on a better delta then the one they actually saw. How is that bad? Please explain.
In the case of the higher offer: as I have tried to explain earlier, it was purely a case for the client of using his desired notional amount to buy options. We did what he wanted. The difference in the number of options for this amount of notional between the two offers was about 20 lots. I think he didn’t mind 20 options more or 20 options less.
Last, our clients will ALWAYS overpay or undersell if they can get their size done. You will also understand that volatility trading clients are more restricted in overpaying and underselling than let’s say a long only equity fund who doesn’t know what option volatility is and only cares about strike exposure and hedging his portfolio at certain levels.
“arent they smart enough to ask around couple of mm or other brokers to see whats the fair value ”
Well they’re smart enough but they simply don’t have the time to go around the market. They use a broker.
And this has nothing to do with lapdances etc. Yes it does happen, and yes other things do as well. But let’s say you’re my client, I take you to Spearmint Rhino twice a week, but every day I fuk up your orders. Will you still give me your business? No you won’t.
@LBB
“everyone involved in that particular trade was happy to trade on a better delta then the one they actually saw. How is that bad? Please explain.”
If you need to be explained how client got screwed here, well its not so bad that i didnt turn out to be brainless broker ..
“If you’ve done any regulatory exams you should know.”
yah i know the rules, i was asking u to punt on ur own ideas if your ideas are so fuckin brilliant .. its easy to broke shit when u make everyone happy and have no fucking clue who the hell got screwed when all u did was broking .. the eod of mtm wud be zero sum here mr moronic broker ..
pnl wudnt be exactly zero, but lets just keep the arguement simpler in case mr broker looses touch with the pace of discussion
” We did what he wanted. ”
thank god for sucker client of urs, other brokers are even big suckers if they can’t steal the client away
anonymous
January 7th, 2011 at 5:53 pm
Last thing I would like to say in reply to your post “if it hadnt been right, well then too bad for the client; ”
If we skew something and we get taken out we take the hit ourselves. If there’s no opportunity to split the loss with a client (someone who’s willing to help us out) or if we can’t find someone to take the opposite side we will take it ourselves and immediately take our loss. And then we move on. Not everyone can be right all the time. If that was the case I wouldn’t have been in this job for such a long time.
The very last thing I would like to point out to you is the “I scratch your back, you scratch mine” principle which should be the motto for all brokers. A broker exists because someone wants to give him business. If we lift someone 0.50 above his offer he’ll come back to us if he wants something done. If someone gives us a massive order he will get first call on our next order. If you do something for someone you like it when you get something in return. And vice versa. It’s the way of the world. It’s how the City works and why it functions.
having blabered all of the above, i understand ur biz model brother .. broking is good .. risk free and not much bother to head .. i wish i was a broker : )
“The difference in the number of options for this amount of notional between the two offers was about 20 lots. I think he didn’t mind 20 options more or 20 options less.”
Let’s do the maths: 2.40 / 1.90 = 126%. The 26% premium translated to 20 lots fewer. So instead of buying 100 lots, he only managed to buy 80. But the marketmaker bought 2.000 on the screen to hedge his ass according to your fairytale.
Stop talking shit.
What’s Spearmint Rhino? Should I apply for a job there? I’ve given up on All Options.
@ anonymous
January 7th, 2011 at 6:37 pm
I don’t think he mentioned anywhere that the marketmaker hedged his ass on the screen.
I know his maths don’t add up, but maybe he means notional as in number of options * multiplier * underlying price = 15miliion euro. He didn’t specify so it might add up after all.
I think he made a couple of fair points. Don’t tell him off because he made a math fuck up. At least he’s not afraid to tell here how the market really works.
If it was really only about 20 lots difference, i.e. 100 lots traded, the client got royally fucked. That kind of size could easily have been traded with a MM at a significantly better price. If the premium paid by the client is more than the “20 lots” that LBB mentioned, LBB shouldn’t trivialize the client’s loss. It’s a stupid analogy really.
In any event … let’s hope LBB’s clients read this blog.
Meanwhile, I’m left wondering where he finds the time to write a novel on this blog right after the non-farm payrolls!?!?!
the london broker is so smooth .. i didnt even do my math when he said 20 options less or more .. i want a piece of the action, J.T.Marlin style ..
“Meanwhile, I’m left wondering where he finds the time to write a novel on this blog right after the non-farm payrolls!?!?!”
he is a broker, not a trader u moron .. nobody in right mind is going to make a prof market around NFP ..
I agree with 8.04pm. Even as a broker, he should have had more important things to do during trading hours. Like building a CONNECTION and TRUST with his clients. And telling them how cool they really are. And daydreaming about why he couldn’t cut it as a trader. And masturbating over the 65% guy – again.
yah true, this is a classic case of small penis syndrome .. first time come from a broker !
LBB – good chat above. How do i get in contact with you? Would like to do some business through you
Funny, the small-time Dutch MMs showing how ignorant they are of how the market really works, and getting angry about it!!
of course dutch are ignorant .. they have absolutely no idea abt things work in NY/LDN .. if you have worked in amsterdam you would know .. the level of ignorance and self-satisfaction with 100 lots is amazing ..
and given their high level of conceit, somebody trying to show them how small they are in big picture, that would of course get them all upset ..
very much expected ~!
forgot, my mate here in ldn started as trainee broker in BGC .. he’s on 20k base .. no clients for year 1, just carrying coffee sort of job .. pretty shit to start off compared to banks which can have 60k first year comp with much more meaningful learning/experience ..
” actually know a guy who went on to work as a broker to a Moscow based bank and his target for the year was to deliver around 100 mio eur in notional for a reasonable bonus (not the one you mentioned, cause 65% is just siiiick). How difficult can it be for a rookie even to deliver this size?”
man how ignorant are u .. looks like ur dutch broker .. well there is a difference between a bank and a pure broker .. looks like this broker of urs was a sales for the bank and he was having 100 mil of sales credit rather than pure risk free brokerage .. sales credit is spread that bank’s trading book charges to the client for taking the other side of their trades ..
those numbers make no sense
$100m of notional to bring in (i presume that means for the year) is absolutely nothing. Standard size clip is what – $25m for a normal index? So he needs to do just 4 trades a year to get paid???
$100m in sales credits – is saying that the junior sales guy effectively made a $100m profit for the bank.
Bollocks
Check that all your numbers make sense before posting them
apologies – 100m EUR, not $100m
“$100m in sales credits – is saying that the junior sales guy effectively made a $100m profit for the bank.
Bollocks
Check that all your numbers make sense before posting them”
If you still dont understand how sales credit work, then just fucking ask rather than blabbering .. as i said, sales credit is the fucking spread that bank’s trading book charges to the client for taking the other side of their trades .. so spread is mod(actual price – theoretical price) .. now this is what client is paying to bank for taking the risk on its book .. this is not the fucking profit for bank u nut head .. just ask, if u dont understand why ..
now sales guy would have sales credit, Structurer would have the same sales credit and the trader would also have same sales credit when bank takes on the trade.. so one trade and all these 3 people get the same sales credit .. thus sales credit is 3 times theo profit.. now a str prod team in bank might have 100 mil target for the year .. that team might be doing all the asset classes and this moron junior sales guy would be one of the 20 large sales team .. thats what happened here in all probability .. that moron dreaming that he’s generating 100mil for the bank ..
again, if u cant guess whats going on just ask rather than posting off rubbish ..
2011 will be a terrible year for trading. No more volatility
@4:25 Lets see you go short @vol 19. (equities of course)
As its been observed many times, it’s hard for the market to realize over 20% volatility in a year. And at these P/E valuations there isn’t much historic precedent for higher volatilities.
Sure, the structural issues in the equities markets that led to things like
the Flash Crash are still there – but you’d rather give up some of that gamma and just play equities from the short side when you are looking to hedge your longs rather than buy vix/options.
While you’d plan to remind yourselves in 2011 that equities won’t be the place to own vol, you can continue to believe EUR vol will be worth owning. on downside ofcourse
Buy 2011
@1:52 you got it right… Buy 2011 big time.
who’s selling, whats the offer ?
I think the London based broker is from Tullet. I reconize the style.
I have to admit you have sometimes some impressive size to do and it is correctly excecuted not like arrogant wankers from Aurel or Kyte….
As Kenny McCormick goes in the theme song
‘I have got a ten inch penis; use your mouth if you want to clean it’
LBB.. we only get Veronica Vandaag.. you gotta tell em its from south park
My take is that LBB is from Louis Capital or JB Drax…
A guy named Ben $hepherd would suit the LBB role perfectly in my opinion and to be more precise!
LBB has shared some very valid points here, not necessary to gamble for his true identity. And even without high volatility it will be another fine year.
Except when you’re a long only gamma gambler, hoping for another crash. Probably you will see your downside puts decaying every day.. but hey – it’s always possible. Bets aren’t in your favor, but that’s why you’re a gambler anyway.. (and blame it on bad market conditions 😉 )
Testing, testing, 1, 2, 3 …
bah! bah! balls!
I don’t see nothing wrong with having a long gamma bias on a delta neutral book.
If I had to choose, i’d still buy naked options, taleb style, every once in a while instead of selling strangles, let’s say on bear sterns or VW, or any stock…
there’s nothing wrong with your choice or the other choice .. its that only, a choice .. there’s no way you can say the other side of your trades are surely going to loose .. greeks change, exposure change, positions change .. the trader on the other side of your trades would have ur trades and whole other trades, he might put on more trades, he might play his exposure differenly than yours .. stop being so theoretical ..