So fishing has finished for a few months and it is time to get back to the focus on day-to-day trading issues. The changes introduced in early Feb and completed by the end of Feb have been very good and our performance has jumped back to something approaching that achieved last summer and autumn. More importantly, it is working in the current very low volatility environment.
But once a month, this results in the stresses associated with option expiries. Delta moves on the open positions to either 100 or 0, while the remaining time value on the 100s stays high right up to the 10:15 expiry. We are not yet fully equipped for this process and tend to take the view that we should let the time value just decay and take any losses from net delta. My work over the next few weeks will be focused on these expiry issues. I have dusted down some hugely mathematical texts on the subject and am slowly working through them. The problem is, of course, the high gamma on ATM options at expiry.
The second issue to consider is whether to expand the new stuff to include some other markets - once again, to Jerome's constination, I am looking at crude oil.
Finally, there is the question of identifying what might be called "regime changes", where it would be better to exit positions and just sit on the sidelines for a short period. Some indicators do work for this but only provide "necessary but not sufficient conditions" i.e. they do identify the problem times but also have some false alarms.
So lots to be thinking about - I feel surprising up for this after the fishing successes.