Storm Copestand
Traders Magazine Online News

Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

June 2, 2009

Two Birds, One Stone

By James Ramage

Goldman Sachs designed the enhancement for its seven options algorithms, said J.P. Xenakis, head of electronic listed options sales for Goldman Sachs Electronic Trading. Once parameters are set for the options leg of the trade-such as the degree to the hedge, what kind of delta should be hedged on each trade and aggression level-the enhancement launches one of Goldman's many equities algorithms immediately.

"It's meant for clients who want to put on a stock hedge immediately as they're executing options," Xenakis said. "So, we give the client some choices on how they're going to pull this hedge off."

Last year, Credit Suisse began offering clients what it calls "transformational algorithms" to trade equities, futures, options and foreign exchange simultaneously.

Seeking Exposures

One of the firm's cross-asset algos, Liquidity Transformer, changes liquidity from one asset class into another.

All orders for the cross-asset algos run through the AES desk. After a customer sends an order for exposure in, say, an ETF, the algo kicks into gear.

A smart order router-which sits under the algorithm-starts searching in real time for information from any possible source for exposure. An ETF is a representation of some underlying assets, and is made up of those underlying assets' values. These values could include the underlying stocks, effective futures price for those underlying stocks, other ETFs leveraged to that particular ETF and so on.

The router accumulates equivalent exposures to the desired ETF. It then converts all of those values back to an equivalent ETF price. In the end, Patel said, Credit Suisse will have sourced the liquidity and found the equivalent products within the different asset classes.

All of the fills that the customer gets back are in equivalent terms of the desired ETF. Credit Suisse trades all the assets and then swaps them into an equivalent price.

(c) 2009 Traders Magazine and SourceMedia, Inc. All Rights Reserved.