Hedging otm put vega

Discussion in 'Options' started by ben111, Aug 30, 2009.

  1. ben111



    perhaps someone can help me. I'm looking for a way to hedge the vega of an out the money put. Is there any possibility without changing the payoff (delta, gamma, theta) too much? (I think it won't be possible :-(

    E.g. you have a long calendar otm put spread. The risk involved here is that implied volatility of the long put (back month) decreases. Is there any possibility to hedge that risk? You could shrt straddles or short more of the front month otm puts but that would result in a completely different payoff than the original calendar spread.

    Thanks for your help
  2. otm put calendars are typically used because the trader wants the long vega. since it's a simple debit spread, there's shouldn't be any difficult management issues.
  3. mike007


    You could do a few butterflies and that would give you a negative vega.