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Enron Mail |
basically a swaption on vol for nov03-mar04 that expites on feb 25, 2003. they also did the following: i asked why they did swaption AND short call and put spreads.. this was their response.. sorry for the slow confirms today.... --------- Inline attachment follows --------- From: <IMCEANOTES-+22CAROLINE+20ABRAMO+2C+20ENRON+20CORP+22+20+3CCABRAMO+40bloomberg+2Enet+3E+40ENRON@ENRON.com< To: Abramo, Caroline </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cabramo< Date: Tuesday, August 28, 2001 4:22:43 GMT Subject: the trade we have done in NG (based on the old gold trade) was as follows: i buy winter 03/04 forward implied volatility at x% (fixed rate) we agree on x% today and on 02/25/03 you deliver to me the ATMF straddle on X3-H4 priced at x%. I can hit your bid for the straddle (at your bid vol) or take delivery. x% is a function of the swaption vol (02/25/03 expiry on the X3- H4 swap) and the X3-H4 term vol. variances are additive, so: (contd) --------- Inline attachment follows --------- From: <IMCEANOTES-+22CAROLINE+20ABRAMO+2C+20ENRON+20CORP+22+20+3CCABRAMO+40bloomberg+2Enet+3E+40ENRON@ENRON.com< To: Abramo, Caroline </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cabramo< Date: Tuesday, August 28, 2001 4:22:58 GMT Subject: t2= time in yrs to "term" expiry t1= time in yrs to swaption expiry t12= time in yrs from swaption exp to term exp (=t2-t1) s2= annualized term vol s1= annualized swaption vol s12= annualized forward-forward vol t2 * s22 = t1 * s12 + t12 * s122??flip terms around and solve for s122 and that's your forward vol. --------- Inline attachment follows --------- From: <IMCEANOTES-+22CAROLINE+20ABRAMO+2C+20ENRON+20CORP+22+20+3CCABRAMO+40bloomberg+2Enet+3E+40ENRON@ENRON.com< To: Abramo, Caroline </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cabramo< Date: Tuesday, August 28, 2001 4:44:01 GMT Subject: we did the trade now for the winter 2 years hence. numbers looked more compelling. we also put on some short positions in callspreads and putspreads which we did when winter 03 was at $4. that was the biggest winner so far. Reply: SHORT CALL AND PUT SPREADS FOR WINTER03-04 OR CLOSER IN TERM? Reply: out there in 03/04. low delta, but they were low risk too. total luck with the timing. we did it last thursday before the first rumors of an aga revision came out... --------- Inline attachment follows --------- From: <IMCEANOTES-+22CAROLINE+20ABRAMO+2C+20ENRON+20CORP+22+20+3CCABRAMO+40bloomberg+2Enet+3E+40ENRON@ENRON.com< To: Abramo, Caroline </O=ENRON/OU=NA/CN=RECIPIENTS/CN=Cabramo< Date: Tuesday, August 28, 2001 4:43:22 GMT Subject: well, long vol via the FRA trade, and short delta via the cs/ps (we bot putspreads, sold callspreads). the cs/ps were done due to the correlation of vol and price. we figured taht if price went down, our fra vol would end up low, so we bot putspreads. on the flipside, if gas traded $6, it's safe to say our fra vol would be a lot higher, and we wouldn't mind paying out under the 5/6 callsrpead.
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