Is delta independent of vega?

[RGLD]

Delta is the amount the option price will move if the underlying moves $1.
Vega is the amount the option price will move if IV moves 1%.

My question is does Vega effect Delta? Or do both of them attack the options price independently?

If the latter is true, have a delta neutral position doesn't mean anything if Vega can effect the option price too?

Also what about Theta? Does Theta decrease Delta when it winds down? Or is that independent too? Can you do "Theta" spreads where you only benefit from time decay with no market risk?

 

[2rosy]

they're all first order derivatives. they're independent

 

[stepandfetchit]

Delta is the amount the option price will move if the underlying moves $1.
Vega is the amount the option price will move if IV moves 1%.

My question is does Vega effect Delta? Or do both of them attack the options price independently?

If the latter is true, have a delta neutral position doesn't mean anything if Vega can effect the option price too?

Also what about Theta? Does Theta decrease Delta when it winds down? Or is that independent too? Can you do "Theta" spreads where you only benefit from time decay with no market risk?

They are not independent, but the normal usage ASS-U-MEs all other factors remain the same! So delta will be very close IFF volatility remains constant. Vega will be fairly accurate IFF underlying price does not change. -- Most people prefer to ignore the "IFF" part!

 

[stochastix]

There is a reason their relationships are actually partial differential equations, so no it is not

 

[stochastix]

Delta is the amount the option price will move if the underlying moves $1.
Vega is the amount the option price will move if IV moves 1%.

My question is does Vega effect Delta? Or do both of them attack the options price independently?

If the latter is true, have a delta neutral position doesn't mean anything if Vega can effect the option price too?

Also what about Theta? Does Theta decrease Delta when it winds down? Or is that independent too? Can you do "Theta" spreads where you only benefit from time decay with no market risk?

You would need to do delta hedging, vega hedging, gamma hedging, would be interesting to see if its possible but probably costly and greatly reduce profit. Gamma hedging for instance requires dealers to sell into downfalls thus exacerbating the downfall

 

[newwurldmn]

Yes. For an otm option, change in implied vol will change delta. There is often a correlated relationship between vol and spot movements so you gamma and Vega will need to be managed in concert.

You have three basic risks in an options trade: delta, Vega, gamma/theta. They are often related so you have to manage them all in totality though you can reduce aspects of one.

you can’t have positive theta and flat gamma unless you take on second order risks. This is generally done through some
Kind of skew trade but that will create a massive Vega/delta correlated position. I’ve seen many people make/break their careers on that position.

Delta is the amount the option price will move if the underlying moves $1.
Vega is the amount the option price will move if IV moves 1%.

My question is does Vega effect Delta? Or do both of them attack the options price independently?

If the latter is true, have a delta neutral position doesn't mean anything if Vega can effect the option price too?

Also what about Theta? Does Theta decrease Delta when it winds down? Or is that independent too? Can you do "Theta" spreads where you only benefit from time decay with no market risk?

 

[2rosy]

They are not independent, but the normal usage ASS-U-MEs all other factors remain the same! So delta will be very close IFF volatility remains constant. Vega will be fairly accurate IFF underlying price does not change. -- Most people prefer to ignore the "IFF" part!

the post is
Is delta independent of vega?

not is delta independent of volatility

 

[RGLD]

Yes. For an otm option, change in implied vol will change delta. There is often a correlated relationship between vol and spot movements so you gamma and Vega will need to be managed in concert.

You have three basic risks in an options trade: delta, Vega, gamma/theta. They are often related so you have to manage them all in totality though you can reduce aspects of one.

you can’t have positive theta and flat gamma unless you take on second order risks. This is generally done through some
Kind of skew trade but that will create a massive Vega/delta correlated position. I’ve seen many people make/break their careers on that position.

How would you juggle so many different variables in an options trade? I heard you can model a graph on thinkorswim, but you can't map just the deltas can you? Or vegas in a spread?

 

[newwurldmn]

How would you juggle so many different variables in an options trade? I heard you can model a graph on thinkorswim, but you can't map just the deltas can you? Or vegas in a spread?

with the Greeks and risk shocks.
However, with experience you get a feel for what your risks are and how they are changing.

 

[Windlesham1]

Options can give you a free lunch with dessert!