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Second, what strike are straddles traded at.
dev34
Are they set at the nearest 5 cent interval or are they mid-market of the EOL quote?
dev34
Andy: The problem if we limit the size on options to being what size is offered on the swap hedge, we will not be able to offer adequate size on the options.
dev34
Optimally, I think we want to offer a minimum size of 100 across all strikes.
dev34
If the swap is 4/4.5, one a day up, and someone buys half a day, making the market, 4/4.5 one a day by half a day, the size offered on a 10 cent out of the money call might be as low as 30 contracts, a much smaller size than most people want to trade.
dev34
If we restrict to strikes with a lower delta, we face the problem of not offering enough strikes and not making a market in options that have open EOL interest that have moved closer to the money.
dev34
Maybe the answer is to assume the swap hedge to be a penny wide two way wrapped around the EOL swap mid market.
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Thus if the front swap on EOL is 4/4.5 one a day by half a day, the input into the option calculator is 3.75/4.75, 100 up.
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In this case I think 100 is necessary because once a strike has open interest, we must continue to support it.
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Thus I anticipate having to make markets in deep itm options as the market moves.
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In terms of straddle strikes, I think the edge received from buying straddles struck on the EOL offer and vice-versa is not big enough to compensate for what I think the industry will view as a scam and another way Enron is trying to rip people off.
dev34
Although striking on the mid-market is probably easier for the trader, I actually think striking in five cent increments makes more sense.
dev34
It allows people to trade out of the position on EOL.
dev34
Whereas if someone buys the 3085 straddle and the market moves to 3200, they have to call ENE to close the trade.
dev34
If the trade is struck at 3100, we will have a market on both the 3100 call and put at all times.
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Secondly, I would anticipate non-volatility driven option traders may elect to sell either just the put or call in this scenario depending on their view of market direction.
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Jeff: Sorry for my cryptic answer in regards to the LNG deal on Friday; I was a bit confused by the question.
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In terms of the gas pricing, this is a deal that should be done.
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Market conditions are very conducive to hedging a fair amount of the gas.
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Obviously, a deal this size would require Enron to wear a considerable amount of the risk in the short term, but the risk-reward of the position looks very favorable.
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I am certainly willing to sign off on this deal around the $3.00 level.
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John
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Please stop sending emails to jennifer_arnold to the following email address: You have the wrong person
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Hey, I just got your email.
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Call anytime after 4:00.
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Obviously, I don't read my email very often
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Doug: To confirm the pricing of the LNG dela:: I can show a $3.01 bid for the Nymex portion of 160,000 mmbtu/day for the time period Jan 2003-Dec 2014.
dev34
The bid on Henry Hub basis for same time period is -$.0025 resulting in fix price of $3.0075; the bid on Sonat basis is -$.0175 translating into a bid of $2.9925.
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Notional volume = 70,128 contracts.
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PV volume = 37,658 contracts.
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Exposure per $.01 move = $3,760,000 John
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Please take me off your mailing list
dev34
Kevin: Come by Tuesday between 5:00-5:30 if you still want to see the new spreadsheet.
dev34
However, it may be more valuable to talk to Dutch Quigley, who runs my risk, as he built the system and understands the vertical integration better.
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John
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Please do not send these emails anymore.
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I am not Jennifer Arnold
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Stupid taxes
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Let's meet at 4:00.
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Can we meet at 5:00 today?
dev34
Please use this vol curve for a dry run to figure out var for my book, NG price, and Jim's book, Storage, and communicate the results.
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Thanks,John
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Tanya: On Friday I emailed a new vol curve to use for VAR testing.
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I was under the impression that you could apply this vol curve to the price book and storage book and have a new experimental VAR number by Monday.
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I have not received any response.
dev34
Please reply with status of this project.
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John
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Tickets requisitioned for England/Germany.
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$1500!!!!!!
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In preparation for our discussion tomorrow, can you run VAR numbers for some 6.
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+1000 July Chicago Basis -1000 July Michcon Basis 7.
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+1000 July Henry Hub Index 8.
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+1000 July 2003 Chicago Basis Again, these are separate portfolios.
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I'm trying to check that the VAR numbers make logical sense.
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Thanks, John
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yes
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Can I add 3 more portfolios: 1.
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+1000 July 2003 Chicago Basis - 1000 July 2003 Panhandle Basis 2.
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+1000 June Henry Hub Cash 3.
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+1000 June Henry Hub Cash - 1000 July Futures Thanks, John
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Thank you very,very much.
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Love you, John
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Hey Liz, Thanks for letting me use the phone.
dev34
A real life-saver.
dev34
My brother had a Nokia world phone on the trip and it seemed to work better.
dev34
It got reception some places where mine did not and is more user-friendly.
dev34
On a different topic...Greg talked me into upgrading to first class for a flight in December to Australia.
dev34
He talked me into it by agreeing to pay for half.
dev34
Cliff found it funny and agreed to pay for the other half.
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I haven't expensed it yet so I'm having Barbara send it on.
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Thanks, John
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euro 2004 in portugal
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Steve: Good hearing from you.
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Hope all is going well.
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I gave your name to Per Sekse in our New York office.
dev34
He deals with a couple hedge funds we currently do business with and has addressed some of the obstacles that we face with other counterparties.
dev34
He is on vacation this week but will call next week.
dev34
If you have any problems or concerns, feel free to call.
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John
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Andy: Sorry...I was on vacation last week and fell behind my email.
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Anytime you want to talk is fine.
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I'll be around today if it works for you.
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john
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How about 4:00 ??
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Please top level the following P&L out of my book because the market settled limit down.
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End of day position Amount settle was off in my estimation Total amount
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Dinner tonite....birthday boy???
dev34
world cup 2006 -- Germany BOO!
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Per: I've talked to him several times in the past.
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I told him that you would call because of your experience with setting up funds.
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They have two main problems.
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One is setting up their internal systems.
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Second, they have credit problems with a BBB+.
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Please call and introduce yourself.
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Thanks, john
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Hey, Can Greg fit me in for about 30 minutes tomorrow afternoon?
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--- Your secret admirer
dev34
Hello, Bill Perkins of Small Ventures USA is having a party this Saturday at the Mercantile bar downtown.
dev34
He has rented out the place, has a band, open bar...
dev34
usually pretty fun.
dev34