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>"Do you suppose they price those such that a trivial stock pair hedge will make money?" The example was just for illustration purposes, a simplified version o

>"Do you suppose they price those such that a trivial stock pair hedge will make money?" The example was just for illustration purposes, a simplified version of how it works. >"Also options trading is a regulated marketplace" Is that right? https://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded https://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_e... "Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, exotic options – and other exotic derivatives – are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds. Reporting of OTC amounts is difficult because trades can occur in private, without activity being visible on any exchange." >"Finally 'yummyfajitas is an ex-HFT who has written good blog posts on the subject." I would welcome yummyfajitas 's feedback. I'm not attacking yummyfajitas, if that's what you're implying.

kasey_junk 11y ago
> The example was just for illustration purposes, a simplified version of how it works. Sure, but real options trading is much, much more complicated than that. You might as well have said "Find an equity that you know is underpriced and buy that". There is no secret sauce in options trading for HFT or otherwise. Like any market based trading profession you find a place you think is incorrectly priced, you take a position, and then you either make or lose money. The more often you are right the better a trader you are. There is literally nothing special about options trading vs equities trading in this regard (except maybe leverage as options can be dramatically leveraged). > Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties You could do private options I suppose (but HFT would have a distinct disadvantage here), but most options are traded on exchanges (I believe CBOE is still the biggest options exchange in the US) just like any other exchange traded instrument. The SEC, FINRA and CFTC all have rules about options trading in the US. > I'm not attacking yummyfajitas, if that's what you're implying. I didn't mean to imply you were attacking yummyfajitas, only that he probably knows about options pairs trades given that they are a very common trading pattern for anyone who has worked in the trading industry, HFT or otherwise.

kasey_junk 11y ago

> The example was just for illustration purposes, a simplified version of how it works. Sure, but real options trading is much, much more complicated than that. You might as well have said "Find an equity that you know is underpriced and buy that". There is no secret sauce in options trading for HFT or otherwise. Like any market based trading profession you find a place you think is incorrectly priced, you take a position, and then you either make or lose money. The more often you are right the better a trader you are. There is literally nothing special about options trading vs equities trading in this regard (except maybe leverage as options can be dramatically leveraged). > Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties You could do private options I suppose (but HFT would have a distinct disadvantage here), but most options are traded on exchanges (I believe CBOE is still the biggest options exchange in the US) just like any other exchange traded instrument. The SEC, FINRA and CFTC all have rules about options trading in the US. > I'm not attacking yummyfajitas, if that's what you're implying. I didn't mean to imply you were attacking yummyfajitas, only that he probably knows about options pairs trades given that they are a very common trading pattern for anyone who has worked in the trading industry, HFT or otherwise.