equations for neutralizing greeks

Discussion in 'Options' started by stevenpaul, Aug 18, 2010.

  1. Hi friends,

    Can anyone here kindly recommend any sites or books presenting example equations on how to neutralize the Greeks in options spreads? Alternatively, maybe someone could post an example equation or two of their own. It's easy enough to set up a delta-gamma neutral vertical spread, but when more than two legs or two Greeks are involved, I'm lost. In __Macmillan on Options__, the author dazzles us with a spread that neutralizes delta, gamma, theta, and the gamma of gamma, while achieving a pre-set value for vega (page 515). Unfortunately, the equation employed to work such magic is left out. I'd really love to know how to neutralize any combination of the Greeks in any given type of spread (if that's even possible). At least my intellectual curiosity would be satisfied if I could figure that out, whether or not it would prove profitable. Any tips or assistance would be much appreciated!


  2. MTE


    It's a simultanous equations problem.
  3. cvds16


    I can't see the point of trying to do that: the spreads are going to kill you anyhow. Trying to get real neutral on all the greeks is a game for market makers and even they have to take them as they come.
  4. Mr. DT

    Mr. DT

    see McMillan on Options, second edition, around page 500. I finally have a reasonably neutral position after reading this.
  5. spike88


    Using Thinkorswim you can analyze what adding certain trades will do to your position, or your portfolio as a whole. It's pretty slick.

  6. Theory of relativity + time machine for neutralizing theta.