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Non-Tech : Interactive Brokers / Timberhill
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To: sams291 who wrote (7343)4/27/2007 11:54:36 AM
From: RockyBalboa  Read Replies (2) of 9012
 
I agree. Best case, it was flat, any stairstep means they declined YOY.

What is much more important than the numbers itself is the quality of earnings (here: risk-taking vs commission income) as well as the nature of the risks:
It is somehow a vega short environment. If the volatility is too low it might get hit by slow business and turnover.

If the volatility is too high or the number of surprises is high (ie the inferred volatility to low vs the realised) then earnings tail off because of holding the losing ends too often.

More precisely said in hedge fund talk, they win through options arbitrage but lose in event driven situations. With the predominance of corporate events they will have a tough time as long as this speculative fever does not tail off a little.

Here I have a certain corporate event in mind; before a takeover of a dull but large financial company options were hardly traded but right in front of the announcement the turneover in out-of-the money gamma-bombs excursed to several 100 times. Market makers lost options at seemingly good prices but the other day, they saw why.
If and as such events happen more often these days the automated market makers having an options book only partially hedged may give back much of what they earn otherwise.
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