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You may be forgetting the equation: Change in premium = change in intrinsic val + change in extrinsic val Change in intrinsic val = movement of underlying stock Change in extrinsic val = decay in time value (affected by change in IV and change in days till exp) Clearly the movement in the...

I don't think your assumption holds if I buy a call when IV is at its peak. The volatility drop would cause a big drop in premium.

According to your post, the equation is "Port = delta + 0.5gamma^2 + 0.25theta + [arith.inverse]vega" What changes do I need to make to apply it to this instance? What is the arithmetic inverse of vega? Simply 1/vega? And in this instance, port would just be the change in initial investment in...

2 questions: 1) Doesn't this assume that implied volatility is only a function of strike price? I don't think this applied to stock breakouts. IV spikes before the catalyst (typically earnings) then falls quickly after the breakout, even when the stock moves. But the assumption you (and most...

So to simulate the X% move to the final state, you just lower the strike for the original option by a factor involving X% correct? If so, why don't you lower the strike this way: Strike = Strike(1-x)? Does this have to do with log math? Sorry if newbie question, read many options books and many...

Its intrinsic value will. But the extrinsic value includes the implied volatility, which changes during the period you hold the option.

Hey Folks, Suppose you buy an ITM call (lasts 30 days) to profit from breakout from a flat base. I'd like to predict the change in extrinsic value if an X% move occurs within 25 days given an option's delta, gamma, theta, vega, and vomma. Doesn't need to be perfect, just need a good...