Just a question. If infinite gamma existed, you could buy it? How much are you willing to pay for infinite gamma?
Risk/reward should be infinite as well...basically a no brainer, right?
Calendar Spread Basic Setup Question
- Thread starter LaxFan
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Risk/reward should be infinite as well...basically a no brainer, right?
This is the line I am most fascinated by...
"...And if I am long vol, this existence of infinite gamma should be able to make me an infinite amount of profit as long as it's not stopped by a ballooning theta.
1/10000000000000 of a chance of making an infinite amount of profit is still an infinite amount of profit..."
Spoken like a true mathematician.
Kashkari is trading options! Who knew!
"...And if I am long vol, this existence of infinite gamma should be able to make me an infinite amount of profit as long as it's not stopped by a ballooning theta.
1/10000000000000 of a chance of making an infinite amount of profit is still an infinite amount of profit..."Spoken like a true mathematician.
Kashkari is trading options! Who knew!
Another question is do prices really follow a theoretical pricing model irl trading? I mean that's a question I guess for MM's like @taowave, when he's making a market for options, does he really plug in all the inputs into a pricing model to arrive at a price to quote to his trading counterparty or does he look at how much of a spread that he can from his hedging from either futures or from the individual asset market and quote based on that? If he's not taking prices from a pricing model which dictates gamma to be zero, then how do we know that gamma is really finite irl? Now irl there is circuit breakers and market closing which essentially puts a stop on how far the price can go so that really renders gamma to be finite. So maybe we are essentially paying for the options based on gamma being infinite due to the existence of the circuit breakers and market closing but theoretically, what if there is no circuit breakers and market never closes and we can trade forever non-stop, what value could gamma take?
My math is not strong enough to prove it or demonstrate an infinite gamma that can happen irl but this is something that I just cannot reconcile; it's how prices behave differently irl vs. being given by a pricing model.
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You have just logically argued yourself out of your own theory. Since gamma cannot be infinite because of circuit breakers and market closures, your theory is dead. But you continue on with theoretically WHAT IF?
There is no more WHAT IF! There are breakers, so you cannot have infinite gamma! You just defeated your entire argument/theory!
What if I had infinite money, and just longed some e-mini futures and rolled them? Since indices only go up over time, I also have infinite profits forever! My delta beats the theta! But that is not how it works in IRL, because futures have expiry, like options do.
Oi!
Gamma becoming finite just because of some bureaucrats' decision or some time constraints don't really count. LOL Just because you must go to bed by 10:00 PM doesn't mean it's not possible to stay up all night.
But all well, you believe what you will.
Does gamma becoming finite because breakers exist and markets close count? That is what you seemed to have said just above. Or did I read that wrong?
Maybe yes maybe no. This is what I am trying to explore when everybody is trying to flatly reject it because it doesn't fit in a pricing model. [/QUOTE]
You already said it yourself! Do you not read what you have typed? You are exhausting.
"...Now irl there is circuit breakers and market closing which essentially puts a stop on how far the price can go so that really renders gamma to be finite..."
It was just a few posts above this where you typed that. YOU typed it man, not I. YOU. For FRACK's SAKE!
Look I already told you, you believe what you will and I will explore my own theory, OK?