theta

[met1989]

Assuming I'm just looking at theta not to worry about vega or gemma if theta is positive does it mean im making money every day?

 

[deltastrike]

Assuming I'm just looking at theta not to worry about vega or gemma if theta is positive does it mean im making money every day?

No, theta can be offset by delta (ie price moving against you).

 

[tommcginnis]

No. It does mean that the passage of time assists your net position, though.

Remember that theta is a BSM "Greek" and as such, is a rate of change.
The theta you see represents the mathematical derivation of the time portion --
you still have delta (the market-movement portion) and 'vega' (the market vol portion) that could easily overwhelm whatever theta 'adds' to your net position.

 

[met1989]

No. It does mean that the passage of time assists your net position, though.

Remember that theta is a BSM "Greek" and as such, is a rate of change.
The theta you see represents the mathematical derivation of the time portion --
you still have delta (the market-movement portion) and 'vega' (the market vol portion) that could easily overwhelm whatever theta 'adds' to your net position.

Thanks for your reply from the last book I read he says that options that are far from expiry are less sensitive to Vega?

 

[Wheezooo]

Thanks for your reply from the last book I read he says that options that are far from expiry are less sensitive to Vega?

The opposite. Vol might moves less but Vega is larger, therefore options far from expry are more sensitive to vega.

And theta and gamma are bedfellows. Not theta and vol, nor theta and delta. Heck, I was trained to never even think of Delta as a risk.

 

[met1989]

Wher

The opposite. Vol might moves less but Vega is larger, therefore options far from expry are more sensitive to vega.

And theta and gamma are bedfellows. Not theta and vol, nor theta and delta. Heck, I was trained to never even think of Delta as a risk.

e did u train ? I like your style

 

[Wheezooo]

For a boutique firm, as a member of the NYMEX and COMEX, but that will be 3 decades ago come this December.

 

[met1989]

For a boutique firm, as a member of the NYMEX and COMEX, but that will be 3 decades ago come this December.

sounds cool and fancy

may i ask if im selling a spread and my margin 550$ should i exit when its 10% margin profit?

 

[Wheezooo]

No idea, it's not how I think.

But as a rule of thumb. If you are exiting your winners for 10% gains you better exit your losers at less than a 10% loss.

 

[gaussian]

Thanks for your reply from the last book I read he says that options that are far from expiry are less sensitive to Vega?

LEAPS are generally over-exposed to vega. Intuitively this is because volatility out past a few days is very difficult to predict. As a result (intuitively) a small change in volatility today "spooks" the options later down the expiration cycle because there's a good chance the ATM won't be the ATM for long.