Gamma vs Volatility

if you view delta as prob(ITM), it makes sense that when IV is low, the distribution is thinner, so the prob of OTM->ITM is lower, making gamma higher as spot moves; when IV higher, the prob is also higher making delta less sensitive so lower gamma
 
Wheezooo said:
Cool, thanks for the image. Confirms what I said.

The extreme wings exhibit no optionality - no extrinsic. Greeks are all move towards zero with the exception of delta which is 100 or 0.
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No, thank you for the image, your the one who posted it. Obviously all greeks move to zero, that wasn't the OP's question. Does gamma move up or down as IV increases, looks like potentially both depending on how far OTM you are.
 
Wheezooo said:
Don't need to look. My bet is that the low vol OTM options no longer have optionality(premium) in them. Vol 0, gamma 0, theta 0. Anything else would make no sense.

2 - Gamma increases as vol goes lower. This is not debatable.
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It's not, but Dgamma/Dvol(Z) is the gearing (along with DgammaDspot(S)) that generates optionality in the OTM as vol and/or the distribution expands. Think of DgDs as synthetic DgDv.
 
I believe it was volskewtrader that said it, people need to be careful comparing strike to strike when they should be thinking more delta to delta, otherwise you start comparing apples to breadfruit. When something gets so far out of the money, or deep-in, it is no longer an option in anything but name. They exhibit little to no optionality.
 
Wheezooo said:
I believe it was volskewtrader that said it, people need to be careful comparing strike to strike when they should be thinking more delta to delta, otherwise you start comparing apples to breadfruit. When something gets so far out of the money, or deep-in, it is no longer an option in anything but name. They exhibit little to no optionality.
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OK, but what happens to the OTM option (strike) at cab when it suddenly trades ATM?
 
Hey guys sorry about the images! I have uploaded them again to this message... hope it works this time.

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Just for fun, attached below is a chart for some 2nd order Greeks:

upload_2019-9-6_22-21-7.png


Tomorrow we talk about 3rd order Greeks! Grin.

Edit: Looks like the charts already shows a couple of 3rd order Greeks. I’m just a couple of beers from complete understanding!
 
destriero said:
It's not, but Dgamma/Dvol(Z) is the gearing (along with DgammaDspot(S)) that generates optionality in the OTM as vol and/or the distribution expands. Think of DgDs as synthetic DgDv.
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I get it, wheezooo is what I called DdelV thirty years ago. Good lord that sounds terrible to say. 30 - ouch!
 
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