Any option trader who focuses on volatility trading will tell you that the price of volatility is the single-most-important factor in trading volatility. That might sound intuitive to us, but it wasn't too long ago when implied volatility was merely a plug-number when we wanted to price an option (or…

Market neutral strategies account for a significant part of quant-based strategies. Just think about your typical equity long-short/pair trading/vol relative-value. All these strategies find their edge in detecting value (or mispricing) in idiosyncratic risk while eliminating the market beta. …

Let’s talk securitization…. Anyone who was around during the roaring 2000s probably remembers the hype in Credit Derivatives (namely in MBS and CDO). These were the hottest commodity in town, and everybody and their mother wanted a piece of the action. These products were, essentially, a type of securitization. Securitization, without going too…

So we continue our journey down the rabbit hole of volatility surface and vega risk exactly where we left off last time (if you want to refresh your memory, hop back to Part I ). As we recall, our theoretical options book took a massive hit after the sudden drop…

The topic of Implied Volatility Modeling has long been at the center of derivatives research. …

Every now and then I get DMs from novice trades asking me for advice on the best way to go about learning options trading. My answer is always to Start with introductory-level books like Natenberg’s “Option Volatility Strategies”, Euan Sinclair’s “Options Trading”, or John Hull’s “Option, Futures, and Other Derivatives”…

In this post, I’m going to wear the risk manager hat, as it seems like a good opportunity to put my FRM certification to use, and share my knowledge of risk management, trade life cycle, and financial markets. Everyone who trades in financial markets knows that trading involves risk. Risk…

We tend to take many things in trading for granted, and I think that liquidity and price discovery are two things that we rarely think about. Let’s imagine for a second, that we trade E-minis but we can’t see real-time price and when we call our broker, she quotes us…

The world of quantitative finance is a fascinating world. The ability to make sense of financial markets using data, math, and statistics is a mind-blowing idea in my opinion. …