You may be forgetting the equation: Change in premium = change in intrinsic val + change in extrinsic val Change in intrinsic val = movement of...
I don't think your assumption holds if I buy a call when IV is at its peak. The volatility drop would cause a big drop in premium.
According to your post, the equation is "Port = delta + 0.5gamma^2 + 0.25theta + [arith.inverse]vega" What changes do I need to make to apply it...
2 questions: 1) Doesn't this assume that implied volatility is only a function of strike price? I don't think this applied to stock breakouts. IV...
So to simulate the X% move to the final state, you just lower the strike for the original option by a factor involving X% correct? If so, why...
Its intrinsic value will. But the extrinsic value includes the implied volatility, which changes during the period you hold the option.
Hey Folks, Suppose you buy an ITM call (lasts 30 days) to profit from breakout from a flat base. I'd like to predict the change in extrinsic...
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