macrocephalopod on Twitter: "Like, if I wanted to spend time thinking about rates and coupons and financing costs I would be a bond trader.… https://t.co/f7AqaF0xD3"

@macrocephalopod

Paul Allen, Vice President M&A, Pierce & Pierce (Sie/Hir) | Vegan | Silence is Violence | Women’s Rights Are Human Rights | ACAB (Assigned Cephalopod At Birth)

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macrocephalopod‏ @macrocephalopod 1 Mar 2021

My final point is that nothing I've said here is particularly specific to VIX, but VIX is a very clean example because the underlying is not tradable (so there aren't any arbitrage relations and everything is priced on expectation) and it's not seasonal.

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macrocephalopod‏ @macrocephalopod 1 Mar 2021

With suitable adjustments to take arbitrage bounds and seasonality into account, this is a very general framework for trading all kinds of futures. FIN.

4 replies 0 retweets 34 likes

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macrocephalopod‏ @macrocephalopod 1 Mar 2021

Gonna tag the vol nerd crew for their input @KrisAbdelmessih @Ksidiii @bennpeifert @pauleluard @SqueezeMetrics @NewRiverInvest @VixCentral @VolQuant @QuantVol @varianceswap @selling_theta

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Lily.wav‏ @nope_its_lily 1 Mar 2021

Replying to @macrocephalopod @KrisAbdelmessih and

One day I will be up here, although I did only learn a few weeks back that VIX options surprisingly also don't track spot VIX, so perhaps not.

1 reply 1 retweet 13 likes

Lily.wav‏ @nope_its_lily 1 Mar 2021

Replying to @nope_its_lily @macrocephalopod and

Although it makes sense intuitively, because you can't really hedge and therefore rationally price the spot VIX.

1 reply 0 retweets 7 likes

macrocephalopod‏ @macrocephalopod 1 Mar 2021

Replying to @nope_its_lily @KrisAbdelmessih and

All options should be options on futures, it would make everyone’s life easier.

5 replies 0 retweets 13 likes

brrrzooka‏ @brrrzooka 1 Mar 2021

Replying to @macrocephalopod @nope_its_lily and

They are, it's just that it's less of an issue for equities. E.g. use S=F * exp(-r*T) in BS and you get Black 76

1 reply 0 retweets 6 likes

macrocephalopod‏ @macrocephalopod 1 Mar 2021

Replying to @brrrzooka @nope_its_lily and

Works until there’s a dividend or the stock is hard to borrow :(

4 replies 0 retweets 4 likes

Benn "DJ D-Vol" Eifert‏ @bennpeifert 1 Mar 2021

Replying to @macrocephalopod @brrrzooka and

the underlying is always the forward. rates and divs in bls is just one particular way of writing that down

2 replies 0 retweets 9 likes

macrocephalopod‏ @macrocephalopod 1 Mar 2021

Replying to @bennpeifert @brrrzooka and

Sure but I mean, for a lot of stuff you can’t actually trade the forward (either because there isn’t a matching expiry or because there just aren’t futures/forward full stop) so you have to trade spot and spend time thinking about “dividends” and “financing rates” ugh

2 replies 0 retweets 1 like

macrocephalopod‏ @macrocephalopod 1 Mar 2021

Replying to @macrocephalopod @bennpeifert and

Like, if I wanted to spend time thinking about rates and coupons and financing costs I would be a bond trader.

4:26 PM - 1 Mar 2021

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2 replies 0 retweets 11 likes

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