Re: How to trade Vomma

[.sigma]

Vomma is one of the more important higher order greekz

I also look at zomma, and a few others. But mostly vomma and zomma.

Never in my life would I think I'd write a sentence like the one above ^^ lol

Anyway, vega convexity gives one a better idea of the stochastic process in general.

Its intuitive, not only to measure risk but to view how BSM or other models calculate these higher order greekz in relation to spot.

I'm wondering, these greekz are "exotic" in a sense. zeta, charm, omega, alpha, saddlegammap, etc etc.. and these are on VANILLAS.

So I'm wondering if exotic options like barrier's and such have these same greeks, OR do they have even more "exotic" greeks.. even higher moments than "elasticity/lambda" and such. Optionality is fractal.

 

[.sigma]

Yeah one of their plans claims a 99% profitability rate.

Imagine that.

Theres actually humans out here living in this world who see such things and hawk over their dollars to peak into the dream of America, just to realize it was a quick blip of a "scam".

 

[taowave]

No love for Vanna??

As long as I dont take a delta hit,I don't really get too bothered..Vol gets pumped on me,I typically add or ride it out..

Vomma is one of the more important higher order greekz

I also look at zomma, and a few others. But mostly vomma and zomma.

Never in my life would I think I'd write a sentence like the one above ^^ lol

Anyway, vega convexity gives one a better idea of the stochastic process in general.

Its intuitive, not only to measure risk but to view how BSM or other models calculate these higher order greekz in relation to spot.

I'm wondering, these greekz are "exotic" in a sense. zeta, charm, omega, alpha, saddlegammap, etc etc.. and these are on VANILLAS.

So I'm wondering if exotic options like barrier's and such have these same greeks, OR do they have even more "exotic" greeks.. even higher moments than "elasticity/lambda" and such. Optionality is fractal.

 

[MKTrader]

David Jaffee says to ignore the Greeks and I agree with him.

I only had a mediocre grasp of 1st order Greeks when I traded options for a bit. I'm just not sure about 2nd+ order Greeks, though. Is it really helpful or just the stuff engineering/math oriented traders like to analyze to think they're making good trades? It reminds me a little of indicators of indicators...like an RSI of a stochastic to "smooth it" more. In that case you're just getting further from real indicator (price).

 

[.sigma]

No love for Vanna??

As long as I dont take a delta hit,I don't really get too bothered..Vol gets pumped on me,I typically add or ride it out..

vanna is underrated, I do look at it, I look at them all, only recently have I started.

Its more of a intuitive sense kinda thing, more so than a compliment to my strategy.

Optionality runs deep.

 

[ffs1001]

Is it really helpful or just the stuff engineering/math oriented traders like to analyze to think they're making good trades?

I would like to know the answer to this too. I would love to see a trade where the use of these second order Greeks helped to increase the profits, and the mechanism by which they helped.

Somehow, and without sounding negative, I doubt if that will ever happen - either because this quant level analysis can often be just an intellectual fun game for those involved; or, people using them successfully will not even talk about it publicly for fear of spoiling the party (which I can understand totally).

The unicorn trade would be someone here posting :
"I opened a trade [strategy type] because the [vomma/zomma/insert-2nd-order-greek-name] was X and normally it's Y so it was a good buy."

 

[taowave]

Here's my 2.5 cents on the second order Greeks..

If you have a very good understanding of the first order greeks,you should have an intuitive grasp on the second order..No need to have a complete breakdown of the Greek alphabet..

I love trading TSLA and am typically short Vega,most of the time slightly short gamma. Right or wrong,I will only let that beast beat me in one direction.

If you have traded TSLA you know that the implied are all over the place.Some days I come in delta long,and due to some ridiculous vol spike in an option I am short,my delta will flip from long to short,while my P and L heads south.

If I didn't have a good grasp on vol vs delta,I would most likely panic and buy Delta to stay long...or freak out thinking I may have but a trade in backwards..Thats always fun

Instead,I will sell more of the pumped up option,and double up my position as its typically some sort of limited risk split strike fly or super wide ratio..The cheaper the better,and I simply ignore the change in delta to to a pop in vol.A

IMHO,every trader should have a good understand how vol/skew affects a position..Delta is my main concern,with gamma coming in second. I could run simulations changing vol,or I could look at Vanna. Either way,it's imperative to know why your delta is flipping and why your P and L

I only had a mediocre grasp of 1st order Greeks when I traded options for a bit. I'm just not sure about 2nd+ order Greeks, though. Is it really helpful or just the stuff engineering/math oriented traders like to analyze to think they're making good trades? It reminds me a little of indicators of indicators...like an RSI of a stochastic to "smooth it" more. In that case you're just getting further from real indicator (price).

 

[ironchef]

Vomma is one of the more important higher order greekz

I also look at zomma, and a few others. But mostly vomma and zomma.

Never in my life would I think I'd write a sentence like the one above ^^ lol

Anyway, vega convexity gives one a better idea of the stochastic process in general.

Its intuitive, not only to measure risk but to view how BSM or other models calculate these higher order greekz in relation to spot.

I'm wondering, these greekz are "exotic" in a sense. zeta, charm, omega, alpha, saddlegammap, etc etc.. and these are on VANILLAS.

So I'm wondering if exotic options like barrier's and such have these same greeks, OR do they have even more "exotic" greeks.. even higher moments than "elasticity/lambda" and such. Optionality is fractal.

May I ask you and other experts the following:

1. I know first order greeks reflect the price of options: high vol, high option price, high delta at ATM => expectation of spot up bias... So, if I trade single legs, the greeks affect my cost base. Can I deduce from the first order greeks if my cost is expensive or cheap?

2. Would calculating/examining greeks (especially higher order) tell me where the underlying will be when my option expires?

After I learned chart reading from some helpful posters here, I mostly use price charts to determine my entry and exit. Win rate was actually << 50% but the R:R allowed positive expectancy.

I am searching for some other way that could increase win rate and thank you in advance for your help.

 

[ironchef]

I only had a mediocre grasp of 1st order Greeks when I traded options for a bit. I'm just not sure about 2nd+ order Greeks, though. Is it really helpful or just the stuff engineering/math oriented traders like to analyze to think they're making good trades? It reminds me a little of indicators of indicators...like an RSI of a stochastic to "smooth it" more. In that case you're just getting further from real indicator (price).

After 7 years banging my head, I came to the following conclusions:

1. If you are a macro option trader (retails like me), I don't think greeks matter. After all, it is basically what you paid at entry and what you get at expiration. Strip away all the fancy math, we basically use options as leverage instruments and hope for the best.

2. If you are a pro trading exotic options, combinations, spread, volatility, fly or scalping ... you need more than #1 to make money. A sample of one: I simply could not make money trading anything complex.

 

[taowave]

IC,if you are strictly trading direction and using options as a cash substitute,you really dont need to get fancy..Your main decisions will be should you buy 1 80% spot call as opposed to 2 105% calls...And that is "your call",no pun intended

At some point,you may want to beta weight your individual option portfoilo and perhaps hedge the downside with SPY options