Traders' Roundtable

This is the first time I’ve personally experienced one of these. Was quite strange not knowing why the contract did not move past pre-open to begin trading at the normal open time. Makes sense though to ensure an orderly auction. uggh. Lots of correlation out there today...

http://www.eurexchange.com/download/doc ... 62002e.pdf


Latest Eurex Production Newsboard Messages

Date/Time Subject
08.12.2008 22:11:53 Post Trading extended until 22:45 CEDT
08.12.2008 20:31:01 End of assignment EUREX
08.12.2008 20:13:12 Calculation Basket CF1B
08.12.2008 12:44:20 Final Settl.Prices Fixed Income Futures DEC08
08.12.2008 12:20:49 EEX NEWS: Spot Market Results Germany for 9.12.2008
08.12.2008 11:26:21 EEX NEWS: Fast Market G0BM natural gas NCG
08.12.2008 09:16:40 FGBS set to FAST MARKET
08.12.2008 09:12:19 EEX NEWS: Fast Market for all Phelix Futures
08.12.2008 09:04:57 Options on equities and equity index set to FAST MARKET
08.12.2008 08:38:09 FGBS will be set to pre-opening
08.12.2008 08:36:59 FGBS will be set to halt
08.12.2008 08:31:14 OGBL, OGBM, OGBS set to FAST MARKET
08.12.2008 08:24:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:22:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:21:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:19:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:18:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:16:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:11:01 VOLATILITY INTERRUPT IN PRODUCT FGBS
08.12.2008 08:10:01 VOLATILITY INTERRUPT IN PRODUCT FGBS

Not surprising given the profound lack of liquidity in today's markets. The financial futures are just a glimmer of their former selves. So many participants are now gone, many gone for good, that these markets are really thin -- especially at crunch times. Wicks, spikes, Eurex fast market halts, etc, are now the name of the game.

That's why many "market wizards" (eg, Marcus, Seykota, Hite) warned aganist volatility? When volatility gets insane, you get out (suppose that you had gotten in when volatility/implied volaility was low) and stay out (suppose that you didn't get in when implied volatility was low)?

The way I see it is that a directional speculative position coupled with a stop is equivalent to being long an option, when historical volatility in the market is low, the implied volatility for this "self-brokered" option is also low (because you can set tight stop loss without compromising reliability, boosting expectancy), so the option is "cheap", time to intitiate a long posistion. When historical volatility goes crazy like nowadays, the implied volatility of the option has also shot up, time to sell, and defintiely not time to intiate a new position (equivalent to buying an option).

Thoughts?

Surely there are more than two possibilities? Imagine that you have a huge staff of Blox programmers who are waiting for your instructions on what to test. What are some other policies, other ideas about what to do when volatility goes insane, besides

1. When volatility goes insane, you get out.
2. When volatility goes insane, you do nothing differently. Use your normal exit criteria at all times, whether volatility is "low" or "normal" or "high" or "insane".