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Mav Logically then, if later in the day the SPX was trading at 1410 and you price the puts at 2, what you really did was sell the 1350 puts for 4 at 1410 which would be 17 vol, which is seriously overpriced ? IVTrader - Agreed.

Mav Thanks for the comprehensive reply. Sure, but if the option was overpriced you’d still have an edge. Keep selling overpriced options long enough and over the long run you win. The casino analogy is a good one I think, where they can (and do) take large occasional losses. But because...

I don't follow your thinking here. If you could "isolate other variables", you wouldn't have an edge, you'd have an arb. We all know that having an edge doesn't guarantee profits, but that doesn't make it meaningless, surely ?

Simon The exchange where the option of interest trades will have a contract specification somewhere on their website. Might be a pain to find it, but it should be there. I'm not aware of any central list of European and American options contracts, but will stand corrected.

No, I'd agree with your summary above. It's been hailed so many times on these threads as essential reading, but personally I couldn't get anything from it. I forget what I paid for it, but mine's going for a buck.

MM Do you have any instinctive preference to buying or selling premium ?

Candeo Have a look at Standard Deviation. Then study VAR (value at risk). Personally, I risk no more than 10% (daily) of my trading capital with 95% confidence. Optimum risk levels are subjective, and I wouldn't argue that maybe I have it wrong. But at least I specify and quantify risk...

MTE A bit harsh. Not like you. Bad day ?

Interesting interpretation. If they aren't a gamble, they must a certainty then?

Arnie For premiums to "disappear" other than in-line with Theta expectations, it would mean that the implied Vols must drop "Mon & Tue". Maybe they do, but I haven't noticed it.

Arnie Do you have any data to back that up, or is it just a gut feeling?

FA / MTE Interesting stuff chaps. I'm off to ponder.....

FullyArticulate I does make sense, thanks. But not sure of it's benefits though unless you trade individual equity options against the index options of which they form a part? Even then, Beta's are notoriously unreliable. Need to read you post a couple more times....

Fully Articulate My main strategy is selling front month options, so the vega risk is of much less concern (to me) than Gamma. Remind me not to trade wheat ! I suppose it depends on what markets you trade and how you trade it, as to how you see the risks. I agree that delta is important...

I agree with MU. Gamma is what we buy and sell. It's everything. Using delta as a measure of risk is next to useless.

I agree that knowing what the option delta will be if the stock moves up/down X is useful, but what I asked was....what practical use is it ? From your post I gather you wouldn't dynamically hedge using a false IV plucked from somewhere along the skew, and neither would I. Yet our ever so...

What exactly is the purpose in calculating a “Skew Delta” ? Where the Delta is the hedge ratio to be used in continuous time, calculating a delta using a different IV than the actual option strike IV seems to be a contradiction in terms. In any event, the vol surface itself is dynamic...

Maybe it's a typo. Try Whaley.

Tower Pointing someone towards the BS equation when they are asking about "greeks, specifically how greeks effect each other?" is hardly being a "dick". After reading your post above I suggest you'd do well to revisit the equation yourself ! As for helping others, if you care to read a...

That’s not strictly true. The delta (Nd1) is the hedge ratio. Probability to be called (Nd2) gives the actual probability that the option will expire ITM. Can I assume that was a swipe at me ? So anyone that uses BS for pricing American options “don't know what they are talking about”...