Trading Strategy
I trade options on the most liquid US-listed stocks. Over the years, this turned out to be a somewhat rewarding venture, so I continue it as an ongoing business. The trading is done in the style of Black and Scholes. An option position is initiated at the start of a strategy, and is held until the strategy is unwound. This position remains unchanged unless changes in the margin requirements cause it to be reduced. The shares of the underlying stock are traded during the same time frame so that the position is approximately delta-hedged, given the delta computed under an option-pricing model. This trading style is highly unusual for an individual trader. Most individuals cannot pursue it due to lack of knowledge and IT infrastructure needed to compute risk, generate trade ideas and manage other aspects of the business. On the other hand, this trading style is bread-and-butter of derivative trading desks at investment banks, hedge funds and other institutions, and is practiced in trading of options on bonds, foreign exchange, interest rates and, of course, common stock.
My trading business is unique in that I alone manage every aspect. In contrast, in an institutional trading context many people and departments are involved in different aspects such as research, collection of historical data and its storage in a database, placing the trades and managing the aggregate risk of a portfolio, P&L accounting and others.