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Enron Mail |
Cc: vince.kaminski@enron.com, stinson.gibner@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: vince.kaminski@enron.com, stinson.gibner@enron.com X-From: Zimin Lu X-To: Greg Whalley, John J Lavorato X-cc: Vince J Kaminski, Stinson Gibner X-bcc: X-Folder: \Vincent_Kaminski_Jun2001_2\Notes Folders\Discussion threads X-Origin: Kaminski-V X-FileName: vkamins.nsf Please ignor my previous mail regarding the same issue, which contains some typos. Greg and John, I found that by reducing the volume per trade and increasing daily number of trades ( keeping the total volume per day constant), we can be more profitable. This is partially because in a trending market we lose less money by following the market more closely. For example, suppose market move from $30 to $35. If per trade volume is 10,000 BBL and the half bid-offer spread is $1 for simplicity, we take 5 trades of short positions, the total MTM for that day is (-5-4-3-2-1)*10,000=-$150,000 and total trading volume is 50,000 BBL short. If per trade volume is 50,000 BBL, we take one trade, the total MTM is -5*50,000= -$250,000. Thus the net difference between the two trading strategies is $10,000 for that particular day. Therefore it seems that by reducing per trade volume and increasing the number of trades, we can be more profitable as a market maker. I rerun a scenario that Stinson sent to you on Dec. 27 where he used per trade volume of 30,000 BBL. I reduce the number of trade to 10,000 while increasing the number of trades by factor of 3. Almost in all cases, I saw increased profitability. See the colume marked "Change" for dollar amount change in millions. Please let Stinson or me know your thoughts on this. Regards, Zimin Lu x36388 As compared to
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