$delta/$gamma/$theta/$vega

F

ferrycorsten

i get $delta. natenberg brings it up in the chapter on intermarket spreads...therefore i presume it was created to equalize instruments in two different markets; regardless, it is the rate of change in option's value for a 1% change in underlying...$gamma same thing....change in $delta for a 1% change in underlying...

$theta natenberg defines as dollar change in option value with the passage of one day. how is this any different from regular theta? i fail to see the difference between the two.
 
Quote from ferrycorsten:

i get $delta. natenberg brings it up in the chapter on intermarket spreads...therefore i presume it was created to equalize instruments in two different markets; regardless, it is the rate of change in option's value for a 1% change in underlying...$gamma same thing....change in $delta for a 1% change in underlying...

$theta natenberg defines as dollar change in option value with the passage of one day. how is this any different from regular theta? i fail to see the difference between the two.
More...

It is not for to equalize instruments in two different markets. Using the $Greeks is for assets allocation and comparison. If you have a position in Ford and Google, it would be silly to allocate based on pure Greeks. 1000 deltas in a stock trading around 13.50 and 1000 deltas of a stock trading around 814.00 can't be compared without using $delta. Same for the other Greeks. If I choose to allocate no more than 5% of my portfolio to one symbol, using $greeks is very helpful. I would look at the $greek where my risk resides in the strategy.
 
Quote from ferrycorsten:

Thanks 1245. Can you tell me the difference between theta/$theta? Natenberg's definition seems identical to the standard theta.
More...

I have only looked at $delta but I assume the idea is the same. Lets assume you have a portfolio of option positions on twenty underlyings. You look at the bottom of each column on your position page and you will see totals for each Greek. Using the dollar amount of the position to adjust your Greeks put the position in more perspective. So $theta would adjust the Greek to the dollar amount of the position. I have always cared more about $delta because I typically traded delta nuetral most of the time and placed my risk with vega.

1245
 
You must log in or register to reply here.
Back
Top