Enron Mail

From:greg.whalley@enron.com
To:zimin.lu@enron.com
Subject:RE: EOL WTI Historical Trade Simulation - more profitable trading
Cc:
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Date:Mon, 22 Jan 2001 00:46:00 -0800 (PST)

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X-From: Greg Whalley
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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...<