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Enron Mail |
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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Greg Whalley X-To: Zimin Lu, "Greg" <Whalley/HOU/ECT@ECT, John< X-cc: "Vince J" <Kaminski/HOU/ECT@ECT, Stinson< X-bcc: X-Folder: \Lawrence_Whalley_Nov2001\Notes Folders\All documents X-Origin: WHALLEY-G X-FileName: gwhalley.nsf Volume won't affect relative profitability. It just scales the profit or loss. Increasing the number of transactions always results in more profit. Increasing volume just makes the numbers bigger. ----Original Message----- <From: Zimin Lu/HOU/ECT <To: Greg Whalley/HOU/ECT@ECT,John J Lavorato/Corp/Enron@Enron <Cc: Vince J Kaminski/HOU/ECT@ECT,Stinson Gibner/HOU/ECT@ECT <Bcc: <Subj: EOL WTI Historical Trade Simulation - more profitable trading strategy <Sent: Wednesday, January 03, 2001 3:45 AM < <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 < <<truncated...<
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