Dr. Benn Eifert - Bad Ideas (S3E3)
Flirting with Models
The Market Makers and Volatility Arbitrage Players in the Market
Short end of the curve by big real money institutions call of writing strategies and put underwriting strategies so what's the mechanics of that. A large institutional investor maybe via a manager that they use sells a whole bunch of call options one month 20 30 delta call options to a market maker. When the market goes up we get longer equity market exposure because we're long a call option that's convex with respect to the market. In order to hedge the new long market exposure that we get we have to sell futures or sell the underlying equity, when the market goes down we get shorter as a result of being a long convexity.
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