Recent content by hidge

Theta is at its greatest value when the option is ATM and it is getting lower the more distance it gets either in the money or out the money. In a non volatility skew environment (where all options on the same underline and expiration priced with the same implied volatility)- options with...

Hi MTE While this is always right with long Theta positions (the fact that Gamma explodes near expiration) IV is also growing as your short option (which is your short Vega component) lose value and you long option is losing its value less fast - so it increase your overall position...

ATM calendar spread is very sensitive to IV (on your case as a buyer you are long Vega). You should be aware that the closer you are to expiration the more you exposed to changes in IV, specially if the underline is inside the sweet spot - which means not that far either way from your...

You can be long Theta and long Vega - look at time spreads or diagonals for an example. Oded

Long Gamma means buying options instead of selling them. a trader that bought a straddle (long call + long put at the same strike and expiration) is more or less market neutral but long gamma - which means that a strong underline movement either up or down will create profits for that trader...

every historical behaviour of an underline is assumed to be priced into the its options - that's why "fast market" is a relative term that present a rare or low probability event for that specific underline (RMBS daily % swings will be "fast market" for MSFT) 2 things that might help: 1...

Hi John, If you mean that fast pricing are strong or volatile movements in the market than my answer is the following: As a rule of thumb, the closer we are to expiration it will get harder to keep the neutral position and strong movements will kick the position far away from it (because...

Gamma is behaving as an opposite to theta, When your position is long gamma then it is short theta and vice versa. There for, when gamma is near 0 so is theta (it makes it near impossible to put time decay on your side with neutral Gamma). Just as a side note, options traders that looking...

Hello AAA, Although you right about the fact that volatility skew makes the options priced with higher IV the more distance they are from the underline price. Selling verticals with high probability (more than 50%) of profiting will produce a short Vega position as long as the underline price...

congratulation Mark, lots of respect and appreciation for your achievment.

Dendreon Corp. (DNDN) A biotech company that was facing a critical announcement back on April this year. The IV was as high as 430% on the front month and back month options The stock was trading around 5$ and you could sell the back month straddle for 6$ so you could profit even if the...

You caught me Mark :) Small world isn't it? Regards, Oded

You are 100% right. The only thing is that from a retail point of view there are no arbitrage and the slippage will eat any opportunity that might rise, There for, the only reason that a trader might be interested in such a position is the risk elimination ("freezing" the stock) Oded

hello crgarcia, If you will look at the short call and the long put as an individual position you will find out that it synthetically a short stock. the combination between the stock and the equivalent for short stock is a position that has nowhere to go. Such a position will only...

Although it is an ancient discussion and for the experienced trader it is pretty much clear that from pure mathematical aspect there is no edge to neither sides of the option contract, I think that there are some points to be considered as an advantages to the option writer: From a...