Recent content by PatrickYu

Heatmap is an interesting graph provided in R language, it visually demonstrates data features of a matrix. I plotted the attached heatmap for some usual option strategies greeks matrix, pink means large numbers, cyan means small numbers and white means the middle ones. The source data is...

I want to develop a tool for risk management of options portfolio, as have seen several posts here and other forums about this. Just say the simple case as first step, to use the greeks approximation of pnl calculation for different scenarios. pnl = delta * dS + 0.5 * gamma * dS^2 + vega *...

Yes you still need to bet on some specific risks if you want to earn from market, bet on the underlying price directional movement, or bet on the underlying volatitlity.

Agree with newwurldmn and TSLexi. The greeks and most related models can not make sure the participant make money, but they help us to avoid loss "too fast". So they are still helpful. At least the models appear in open papers and courses can not make sure someone could earn, just my own...

From the portfolio's perspective: Delta : long call is positive, long put is negative; vice versa for short call and short put. Gamma & Vega : long option is positive, short option is negative. Theta : long option is negative, short option is positive.

This is the delta-gamma-vega-theta approximation pnl for option portfolio. It is less compute resource consuming than fully revaluation the portfolio and caculate pnl. Is it the only advantage of this method? We could search much papers about "delta-gamma-theta approximation" in google. I'm a...

(2) Then seems the sell side MM's trading is much complex than the buy side, lots complicated models they have to involve in. Besides, the term-structure / smile-dynamic risk also impact the risk management for the options portfolio. The link below is the smile dynamics in scenario analysis...

Apart from delta and gamma, other greeks like vega and theta are also primary risk? What are the secondary risks for option? Spreading you mentioned means the bid/ask spread? How to convert primary risks to this? Thanks SLE,

Thanks for the replies. sle, then how about risk management for the option tradings. e.g. we usually calcualte var against price for the cash equity / FX. Now for options trading, shall we take both underlying price and volatility (and the greeks of option) account into var calculation? And...

Lots options strategies focus on the volatility. E.g. Long a straddle to gain from volatility rallying, or short a straddle to gain when volatility falls. So the key is if the implied volatility (for the listed options) is underestimated or not, comparing it to the historical volatility, using...