Long Vega and Long Theta

Quote from rmorse:

The only way to do that without a calendar, is to buy a 1 X 2 put spread, where the ATM put you sell 1, and the OTM put you buy twice as many. It needs to be a credit spread. If the stock tanks, the OTM puts become ATM, you'll have +Vega on the down side. If the stock stays the same or goes up, your credit spread makes you money.
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Sure, but it's not long vega/theta at inception.
 
Quote from atticus:

Sure, but it's not long vega/theta at inception.
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It would have a small positive or neutral Vega, depending on the strikes you choose and skew. Since equity options rarely expand without and up coming event or a down market, this is the best I could do with the question asked.
 
Quote from samer1:
----option strategy....
----positive vega.....
----positive theta?
----The strategy....
----consist only of options....
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Is "pure arbitrage" an acceptable strategy? You can buy an option on one exchange and short-sell the same option on another exchange at a higher price....I believe it satisfies your desire for the positive vega and theta.....if you have the execution capability to trade in that manner. :cool:
 
Quote from rmorse:

It would have a small positive or neutral Vega, depending on the strikes you choose and skew. Since equity options rarely expand without and up coming event or a down market, this is the best I could do with the question asked.
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I mined for it and can't rind any short backspreads with sufficient skew to net out a +vega. I found some flies, however.
 
Quote from samer1:
So if the IV goes up, the trade makes money. Example: long straddle
The trade also makes money through time decay. Example: short straddle.
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There is only one situation that I can think of that will trade as the OP would like, and it would be a rare trade. Since the OP didn't give a ticker this trade would best be explained with a XYZ example and estimated option prices. I prefer real examples, but this will do for a quick demo.

  • The stock would be a biotechnology stock
  • XYZ at $20.00
  • Sell 1 contract of 21c/19p options. Credit $4.00
  • Buy 4 contracts of 25c/15p options. Debt $2.00
  • Total credit $2.00
  • Scenario one: XYZ trades flat, $2.00 profit.
  • Scenario two: XYZ submits to FDA for drug approval, IV goes way up affecting the deeper OTM options the most.
 
Quote from ForexForex:

There is only one situation that I can think of that will trade as the OP would like, and it would be a rare trade. Since the OP didn't give a ticker this trade would best be explained with a XYZ example and estimated option prices. I prefer real examples, but this will do for a quick demo.

  • The stock would be a biotechnology stock
  • XYZ at $20.00
  • Sell 1 contract of 21c/19p options. Credit $4.00
  • Buy 4 contracts of 25c/15p options. Debt $2.00
  • Total credit $2.00
  • Scenario one: XYZ trades flat, $2.00 profit.
  • Scenario two: XYZ submits to FDA for drug approval, IV goes way up affecting the deeper OTM options the most.
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You're flatlined. No brain-activity. Not only ignorant beyond measure but dangerous.
 
Quote from samer1:

Hello,

Does anybody know an option strategy that gives you a positive vega and a positive theta?

The strategy should consist only of options with the same expiration, so calendar spreads are excluded...

Thanks!

Cheers.
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Why are calendars excluded?
 
The reason why I am looking for a positive vega, positive theta trade is to benefit from the increase in IV due to upcoming earnings. The objective is to construct vega positive trades that have at least theta decay as possible... The best would be to have it theta positive.


Thanks!

Regards,
Samer
 
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