are the greeks useless ?

Discussion in 'Options' started by silver217, Dec 9, 2010.

  1. I have a RUT iron condor for februari
    today's profit is only 25 dollars.

    the greeks were yesterday:
    delta = 2
    gamma = 0
    vega = -30
    theta = 4
    Today RUT went up 3.6 points, and the RVX went down 2.12%

    that would suggest a (2x3.6+30x2.12+4) = 75 dollars profit.

    are these calculations wrong ? or are the greeks wrong ?
    (they are from IB's risk navigator) or are they useless.
  2. sjfan


    You need the change in the implied vol of your options, not the vol index.
  3. donnap


    Where'd you get the 25 profit? IB's option valuation is sometimes off the mark. That calc is suspect.

    You have a four legged position. All kinds of room for error there. The risk navigator calcs should be suspect.

    You are better off taking calcs for the individual options and calculating the P/L from market prices.

    Better yet, just focus on market prices. The greeks are no good to you here - unless you plan on an adjustment.

    Know that you want vol to drop. Know that RUT at mid-point of condor is the ideal price. The option prices give you all of the information that you need.
  4. sle


    I am struggling to even understand your greek numbers here. Is your delta in dollars or in units of shares?

    In any case, your calculation if off because you are taking the change in RVX as the change in fixed strike vol. Since RVX (just like VIX) is an implied variance index, its value changes significantly as it moves across the strikes. Fixed strike vols are less volatile and your vega is in terms of changes in fixed strike vols. If i had to guess, implied have changed like a 1/4 of a vol given the skew in RUT.
  5. spindr0


    Calculate the change in delta per leg (bid to bid and ask to ask). Adjust for any IV change. Multiply each of those by the change in the underlying . Add em all up. If's it's not in the vicinity of the $25 cahnge you noted, then the platform calc is off.
  6. Georgi90


    How can someone trade iron condors, when he still doesn't know the purpose of the greeks, and thinks they are useless, he can't even understand what's iv of option strike itself
  7. Bob111


    greeks are cool..specially Gods ...i have pretty good relationship with Dionysus :p
  8. The method of calculating marks alone whether the model keys off of bid/.ask or mid on a multi legged spread is enough to + - your model significantly.
  9. rosy2


    if you're trading in less than 25 lot spreads the greek changes are too small to mean anything. actually 25 lots might even be too small
  10. sle


    How does the size of your position change the meaningfulness of risk?
    #10     Dec 10, 2010