There are 9 pages of the search term "Vega" and 348 of the term "RSI"

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jonny1lot

I guess that seems to suggest where people's heads are at.

So in just thinking about my long theta portfolio and possible risks, the two that seem to impact PL the most are delta and vega. Deltas don't really worry me as much as I can just adjust at any time with static deltas. I'm obviously short gamma, but that is the nature of the beast being long theta.

Vegas are a different animal, however, and I'm wondering if I should consider some long vega overlays to hedge the portfolio a bit. I've noticed a couple of setups stand out for being high positive vega and low negative theta (to minimize the reduction of my theta). I'm not going to share those setups and I wouldn't expect you to share yours.

But my question is, is anyone out there with a short gamma / long theta strategy actively trying to minimize vega? I know that a bunch will load up on short deltas as a hedge but it would be nice to keep my deltas longer than short and minimize my vegas while maximizing my theta.

Oh and what's the right RSI setting for 99% winners with a 6:1 reward to risk ratio?
 
Scataphagos said:
Nobody bothers with that any more.
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So why does your post answer this specific joke only, that nobody bothers with any more ?

Thought about calendar spread as the more forward the expiration then the less "Vega" sensitive the option.

But I am really not an expert... Consider it as an "UP" post ^^ Or am I just getting this thread wrong ?
 
Apophenia said:
So why does your post answer this specific joke only, that nobody bothers with any more ?

Thought about calendar spread as the more forward the expiration then the less "Vega" sensitive the option.

But I am really not an expert... Consider it as an "UP" post ^^ Or am I just getting this thread wrong ?
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My post was pure joke.
 
jonny1lot said:
I guess that seems to suggest where people's heads are at.

So in just thinking about my long theta portfolio and possible risks, the two that seem to impact PL the most are delta and vega. Deltas don't really worry me as much as I can just adjust at any time with static deltas. I'm obviously short gamma, but that is the nature of the beast being long theta.

Vegas are a different animal, however, and I'm wondering if I should consider some long vega overlays to hedge the portfolio a bit. I've noticed a couple of setups stand out for being high positive vega and low negative theta (to minimize the reduction of my theta). I'm not going to share those setups and I wouldn't expect you to share yours.

But my question is, is anyone out there with a short gamma / long theta strategy actively trying to minimize vega? I know that a bunch will load up on short deltas as a hedge but it would be nice to keep my deltas longer than short and minimize my vegas while maximizing my theta.

Oh and what's the right RSI setting for 99% winners with a 6:1 reward to risk ratio?
More...

Vega pnl can be viewed as the present value of the markets new expected realized vol from your implied vol over the remaining duration of the option. So if you are losing in vega pnl you have to think if you believe the markets new forecast is correct or if you are correct. So you can't really hedge your actual vega expsosure without effectively flattening your whole position. However, you can be nominally hedged but then you take on a different set of risks which may or may not fit your view.
 
newwurldmn said:
Vega pnl can be viewed as the present value of the markets new expected realized vol from your implied vol over the remaining duration of the option. So if you are losing in vega pnl you have to think if you believe the markets new forecast is correct or if you are correct. So you can't really hedge your actual vega expsosure without effectively flattening your whole position. However, you can be nominally hedged but then you take on a different set of risks which may or may not fit your view.
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I've been able to work through an answer to my question. So I'm thinking about vega now as basically deltas. If you look at the /ES and /VX futures, a 20 point SPY move is roughly equivalent to a 1 point move in the Vix. So if my portfolio has -10000 vegas, another way to think of it is being long 5000 deltas.

I don't know if I agree with your statement on hedging vega risk. I can structure a synthetic long in Vix to get long vegas. I could also overlay a bunch of SPX calendars. If I wanted to get short vega, I can sell premium. So at the portfolio level, you can definitely impact vega within a range.

So, at least going forward, here is my process: get my theta number where I want. Next, get my theta/vega ratio where I want it. Then convert vegas over to deltas assuming that -2 vegas = +1 delta (all weighted towards the spoos) to get my "vega adjusted" delta number. Finally, hedge total deltas to wherever you want to hedge it.

My only question now is where to hedge overall "vega adjusted" deltas to. Being truly delta neutral is going to be too much of a drag on my portfolio. My gut tells me to pick a delta range based on the total net liquidating value of the portfolio and hedge to within that range.

So what does my ending portfolio look like? Long theta, short vega and short delta.
 
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jonny1lot said:
I've been able to work through an answer to my question. So I'm thinking about vega now as basically deltas. If you look at the /ES and /VX futures, a 20 point SPY move is roughly equivalent to a 1 point move in the Vix. So if my portfolio has -10000 vegas, another way to think of it is being long 5000 deltas.
More...

Just as a note, the above calculation is a back of the napkin and isn't exactly precise - you'll want to use the actual value of the SPX to calculate the proper ratio.
 
jonny1lot said:
I guess that seems to suggest where people's heads are at.
More...

vega.jpg
 
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