Add training workflow, datasets, and runbook

training_data/curated/text/1fe68aea932bc74157e49022ed7841ad319d0d0f6b75f703fb32caf3426ea3fc.txt

@@ -0,0 +1,33 @@
+Pin Risk
+Conversions and reversals are relatively low-risk trades. Rho and early
+exercise are relevant to market makers and other arbitrageurs, but they are
+among the lowest-risk positions they are likely to trade. There is one
+indirect risk of conversions and reversals that can be of great concern to
+market makers around expiration: pin risk. Pin risk is the risk of not
+knowing for certain whether an option will be assigned. To understand this
+concept, let’s revisit the mind of a market maker.
+Recall that market makers have two primary functions:
+1. Buy the bid or sell the offer.
+2. Manage risk.
+When institutional or retail traders send option orders to an exchange
+(through a broker), market makers are usually the ones with whom they
+trade. Customers sell the bid; the market makers buy the bid. Customers
+buy the offer; the market makers sell the offer. The first and arguably easier
+function of market makers is accomplished whenever a marketable order is
+sent to the exchange.
+Managing risk can get a bit hairy. For example, once the market makers
+buy April 40 calls, their first instinct is to hedge by selling stock to become
+delta neutral. Market makers are almost always delta neutral, which
+mitigates the direction risk. The next step is to mitigate theta, gamma, and
+vega risk by selling options. The ideal options to sell are the same calls that
+were bought—that is, get out of the trade. The next best thing is to sell the
+April 40 puts and sell more stock. In this case, the market makers have
+established a reversal and thereby have very little risk. If they can lock in
+the reversal for a small profit, they have done their job.
+What happens if the market makers still have the reversal in inventory at
+expiration? If the stock is above the strike price—40, in this case—the puts
+expire, the market makers exercise the calls, and the short stock is
+consequently eliminated. The market makers are left with no position,
+which is good. They’re delta neutral. If the stock is below 40, the calls
+expire, the puts get assigned, and the short stock is consequently eliminated.
+Again, no position. But what if the stock is exactly at $40? Should the calls