theta per gamma ratio

[adamchubb]

does this ratio make sense (theta / gamma) as a gauge of gamma risk??

 

[taowave]

If nothing else it should make intuitive sense..

Obviously if you are long gamma,you would like to pay "low rent",and if short gamma you want to charge a boatload..

Low rent = low theta/high gamma

High rent= high theta/low gamma

 

[tommcginnis]

Very handy reward/risk measure.

Put it into words that anyone can understand, and see if you can explain every part of your option inventory/portfolio with it -- including spreads.

Be aware of the graphs of each, and what they can contribute to your use/knowledge as the market moves (or expiration draws nigh).

I run 5 market alarms generally, and this is one. So, .

 

[newwurldmn]

does this ratio make sense (theta / gamma) as a gauge of gamma risk??

it’s called implied vol.

 

[taowave]

Lol...yes indeed..

But it is a good exercise to see the IV effect on theta/gamma

it’s called implied vol.