Message-ID: <21629920.1075842075224.JavaMail.evans@thyme>
Date: Mon, 22 Jan 2001 00:46:00 -0800 (PST)
From: greg.whalley@enron.com
To: zimin.lu@enron.com
Subject: RE: EOL WTI Historical Trade Simulation - more profitable trading
 strategy
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X-From: Greg Whalley
X-To: Zimin Lu, "Greg" <Whalley/HOU/ECT@ECT, John>
X-cc: "Vince J" <Kaminski/HOU/ECT@ECT, Stinson>
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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...>