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For those of you that trade options
- Thread starter cashmoney69
- Start date
Funny thread this one. Surely you people aren't suggesting trading without knowledge of the greeks. You may think you don't use greeks, but whenever you place a trade you are looking at volatility, time, delta, gamma and choose your option/strategy based on these. So you may not consciously be aware of that process, but if you don't understand the greeks then you won't know how to pick which option and quantify your risk. By simple example, if volatility (a greek) is particularly high I won't place a straight call/put but choose a spread instead. And if you don't understand how your position is affected by vol/time etc. then you won't understand the risk/profit in your positions.Quote from riskarb:
I don't monitor absolute greeks beyond gammas. I assume that I will be hitting +/-100 under a shock; so I am rarely suprised. I talk about greeks on ET because that's where the risks lie. FWIW, I monitor my $VaR, gammas and vols.
Daddy's boy
Quote from daddy'sboy:
Funny thread this one. Surely you people aren't suggesting trading without knowledge of the greeks. You may think you don't use greeks, but whenever you place a trade you are looking at volatility, time, delta, gamma and choose your option/strategy based on these. So you may not consciously be aware of that process, but if you don't understand the greeks then you won't know how to pick which option and quantify your risk. By simple example, if volatility (a greek) is particularly high I won't place a straight call/put but choose a spread instead. And if you don't understand how your position is affected by vol/time etc. then you won't understand the risk/profit in your positions.
Daddy's boy
I agree. Entering and managing trades without being aware of one's risks (greeks) seems a bit like gambling to me. I always lose money in Vegas. I guess to each their own...
Quote from daddy'sboy:
Funny thread this one. Surely you people aren't suggesting trading without knowledge of the greeks. You may think you don't use greeks, but whenever you place a trade you are looking at volatility, time, delta, gamma and choose your option/strategy based on these. So you may not consciously be aware of that process, but if you don't understand the greeks then you won't know how to pick which option and quantify your risk. By simple example, if volatility (a greek) is particularly high I won't place a straight call/put but choose a spread instead. And if you don't understand how your position is affected by vol/time etc. then you won't understand the risk/profit in your positions.
Daddy's boy
Yeah, thanks for the remedial trading lesson. I can give you the vol within 200basis on any atm option you like with only the expiration, stock price and premo; sans model. I've not stated I don't use greeks, to the contrary. Ask daddy to help you with reading comprehension.
I just thought of a better example. A trader (let's say his name is Arnie) goes long a sraight call. The underlying moves up and at same time iv collapses and time decays. Trader thus loses money and wonders why. Answer: lack of understanding of the greeks.
Daddy's boy
Daddy's boy
Quote from daddy'sboy:
I just thought of a better example. A trader (let's say his name is Arnie) goes long a sraight call. The underlying moves up and at same time iv collapses and time decays. Trader thus loses money and wonders why. Answer: lack of understanding of the greeks.
Daddy's boy
Wow... you've really mastered it.
Hey riskarb - chill. Post wasn't meant to get at you, just pointing out to other posters the idiocy of their statements and using your post as an example of someone using greeks. As you know (or maybe not) I'm big fan of your posts and obviously you understand your greeks back to front.Quote from riskarb:
Yeah, thanks for the remedial trading lesson. I can give you the vol within 200basis on any atm option you like with only the expiration, stock price and premo; sans model. I've not stated I don't use greeks, to the contrary. Ask daddy to help you with reading comprehension.
Best
Daddy's boy
Quote from daddy'sboy:
Hey riskarb - chill. Post wasn't meant to get at you, just pointing out to other posters the idiocy of their statements and using your post as an example of someone using greeks. As you know (or maybe not) I'm big fan of your posts and obviously you understand your greeks back to front.
Best
Daddy's boy
My point was that over-reliance on model output is building a house on mud. Anyone who's clueless enough to ask why the stock is up and the call is down should consider euthanasia.