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And they need to be informed bets and constantly revised. Don't fall into the trap of Long Term Capital Management, which treated mathematical models as Holy Writ.

As I said above. The Greeks are like your motorcycle's gauges. They help make sure you won't blow up your drivetrain, but they're useless if you decide to drive without any idea where you're going.

Which is why I recommended being gamma-delta neutral. Less gamma equal less change in delta equals less rebalancing equals less transaction costs.

You'd better pay attention to the Greeks! Theta literally tells if time is making or costing you money. Dynamic delta hedging helps you make the profits needed to offset the money theta is costing you, or helps you not lose the profits theta is making you. And if you want to sell...

I'm prepared to risk $15,000 total of Reg T margin (I'm not yet eligible for portfolio margin as I have <$100K and only 1 year of options trading experience). My maximum loss I can withstand is 20% of a position that is 25% of my trading capital.

Thanks. That makes sense. Sometimes I think I have $1.5M and 30 days per position, and try to risk manage accordingly.

Well, my goal is to minimize my risk, not avoid it entirely. Probably by being gamma-delta neutral, long or short vega depending on my volatility outlook, and either theta neutral or long theta. Why aren't vomma and vanna automatically calculated as well? Being vomma neutral would be great.

So I'm going to limit my thetas to -$300/day. What about vega, gamma, and delta? Should I have a limit on positive theta?

I'm trying to figure out how to determine my Greek position limits in order to do effective financial risk management. I can risk $15000 per position, and I am moderately aggressive, and hold my trades for a maximum of 5 days.

Try gamma-delta neutral positions; they should reduce the need to rebalance the delta. http://www.investopedia.com/articles/optioninvestor/07/gamm_delta_neutral.asp

Hi guys! I'm wondering how to play an IV crush post-earnings. Obviously the strategy needs to be gamma-delta neutral, short vega, long theta, and be put on the day prior to earnings release. I know that a gamma neutral position can be put on by using the gamma of the short leg * 100 as...

Is there anyway I can make a limit order that can ONLY be filled at the specified price, and not any higher or lower?

Can OTO orders be used to move prices? Like let's say XYZ is trading at $9.99x100-$10.00x75. Let's say I place a buy limit at $10.05x300 that triggers a sell limit order of $10.06x300. My bid would be the highest bid, so it would have to be displayed. This would stimulate a bunch of...

Elaborate, please. I'd write puts when IV is low, and if I get assigned, I'll wait for IV to rise, at which point I'll write calls.

Just closed the trade. BTC'ed the short call for $2.18, so I made a $0.54/share profit. STC'ed the long put for $0.77, so I made an $0.11/share profit. Overall, trade profit was $0.65/share, or $260. Since I put $2000 at risk, my ROI was 13%. I think what I should do from now on is simply...

I stand corrected. I researched more about that quote, and it's a myth...most options are closed out prior to expiration, and only about 25% expire worthless. I have no idea what I was trying to use that quote to support...

That's why I'd prefer to be a strangle buyer when trading earnings IV. Limited risk, and gamma scalping can hedge. When trading earnings vol, delta and gamma must be neutralized.

Elaborate on your first statement...I'd be trading IV, not direction.

Next month, I'm going to sell ATM strangles on stocks the day prior to their earnings release. It might be too late to take the opposite position, and close the day prior to earnings. And isn't it true 90% of options expire worthless? So doesn't it make sense to sell options?

I'm going to say I was an idiot. But, at least I managed to save it. I realized that my long term outlook on the stock was bullish, but long-term and short-term behavior are quite different. I'm going to continue following CVX, and when put/call ratio is low, and the IV of back month calls...