Delta-Gamma Neutral Self Financing

Discussion in 'Options' started by eagertolearn, May 12, 2007.

  1. cvds16

    cvds16

    do the math and you will know the solution
     
    #11     May 13, 2007
  2. Hmm, LOL, this does look like his homework assignment.

    You rarely state time to maturity as .25 or .5. At least, I know I think in terms of days to expiration, not ".25 years to maturity"
     
    #12     May 13, 2007
  3. nitro

    nitro

    Buy 153.8 puts, sell 103.12 calls and go long 619 shares.

    nitro
     
    #13     May 13, 2007
  4. Any references for how you got those figures?
     
    #14     May 13, 2007
  5. nitro

    nitro

    High school algebra. I just know how to solve an underdetermined system of equations. Let me see if I can find a reference on the net.

    nitro
     
    #15     May 13, 2007
  6. nitro

    nitro

    Here is the idea:

    http://www.ualberta.ca/dept/math/gauss/fcm/calculus/multvrbl/basic/ImplctFnctns/ovrdtrmnd_exmpl.htm

    but you want it in matrix form, so:

    http://home.ubalt.edu/ntsbarsh/Business-stat/otherapplets/SysEq.htm

    I just looked for anything. I don't know if those are clear or not.

    The subject matter is Linear Algebra,

    http://en.wikipedia.org/wiki/Linear_algebra

    which is a sub-subject of Abstract Algebra [why it is called "abstract" is a huge story in itself. A fantastic book on this is http://www.amazon.com/Artist-Mathem...9041569?ie=UTF8&s=books&qid=1179065604&sr=8-1 but the book is very tedious].

    http://en.wikipedia.org/wiki/Abstract_algebra

    Which are a sub-subject of ......

    nitro

    PS, probably my favorite subject in the world [but on the frontier of mathematical research] is

    http://en.wikipedia.org/wiki/Algebraic_geometry and how it relates to this program: http://en.wikipedia.org/wiki/Langlands_program
     
    #16     May 13, 2007
  7. what if price goes to 200 $ ? Looks like a loss of > 700k to me , no ?
     
    #17     May 13, 2007
  8. nitro

    nitro

    Whoops, 6190 shares.

    Sorry, typo.

    nitro :(
     
    #18     May 13, 2007
  9. Nitro , in this case position still loses around 150k .
    For one that trades future vols increase on daily bases , I'm very interested to see how others traders can solve this equation without rate of speed ( info , which OP choose to ignore when I asked him).
     
    #19     May 13, 2007
  10. You can't construct a passive position which maintains neutral gammas. There is nothing to solve algebraically; you can't isolate vega without a continuous hedge.

    IV: dgamma/dspot isn't necessary. The OP is looking for something that doesn't exist.
     
    #20     May 13, 2007