Gamma is the change of delta as a function of underlying price. So, since here we are shifting strike rather then spot, our new delta (in absence of other effects) will be original delta plus gamma contribution due to change in strike. I.e. if gamma is zero (for example, both options are DITM) your delta at new strike is same as delta at old strike. There are all sorts of second and third order effects that I am omitting
Sle do you have to add the original gamma on top of gamma(k0) * (k1 - k0)? K1 referring to new strike right? With no change to skew the gamma(k0) * (k1 - k0) is not required but rather using gamma(k0) right? Did a stimu on increasing volatility and the gamma curve shape become a inverted w or rather flat top is this normal?
Just started working through this, up to Vanna now, and everything up to there is accurate (matches my sheet anyways), but the total for Vanna is exactly 100x less than mine. It looks like I'm using the first formula from this Wikipedia page, and you're using the second. I wondered if you had any idea why they would have exactly a difference of 100. I was thinking it might be something simple, but wasn't sure what. turns into ABC = ABC/100 which seems like it should be wrong. Inputs I'm using to test are Stock Price= $16.31 Strike Price = $15.00 IV = 123.58% DTE = 19.319% of a year or 70.5151 days RF rate = .33% Div Yield = 0% Vega = .026109 (based on my calculations) God Bless, NN
Found the answer here: https://quant.stackexchange.com/que...-vanna-differ-by-a-factor-of-100x-why-is-that Cheers!
Thanks for the excel but I have a question the Charm that we calculate is 1.76 but ı didn't figure out how we can calculate the nominal magnitude of the charm ?? For example lets assume ı have 200k gamma short for 50D Call Option I already bought the 100k for delta, lets say evrything is the same except for time to maturity, how can I calculate how much nominal delta I have ?? Thank you for your answers