Hi, Trading with IB I have a short vertical put with positive delta, negative vega but negative theta. I can see that going more far out of the money, the options have lower negative theta, so a short vertical put will always have negative theta while a short vertical call will have positive theta. How could that be? That basically means that if I buy a vertical put I will earn money with each day, which doesn't make sense. Attached is my position and also the chain as I see it.
Sometimes in life you get lucky. If that happens you don't ask questions just back the truck up... Sorry, I don't know the answer, could be mispricing... I was messing with fair out TSLA verticals and at one point the price was $10.2 for a 10 wide vertical. Thus you were guaranteed to make 20 cents, no matter what happened. Then the price changed...
As you can see from the option chain, it is not a one time - the lower you go with the puts, the lower is the theta into the negative zone. Since I am short the spread, selling the options - I am looking for positive theta, so I am not lucky...
Make sure the greeks are calculated off of your realized price (i.e. bid if you are selling, ask if you are buying). Sometimes they can change a lot if you shift the basis of calculation from bid to offer. Just a thought.
Don't count on IB's (or any other broker) greeks. They don't appear to be calculated off the mids which one would expect so you end up with weird numbers. I have some positions that are definitely theta positive that showed negative today. I wasn't worried because it wasn't real.
So what should I use to calculate my portolio's greeks? I guess you are right, cause the spreads in SPX are huge and calculating off the bid and ask makes the whole different.
Does this help? Chart is PUT Theta for that series. A short vertical in the range of the BOX will have positive Theta, else, not-so-much! -- your position extends into the "not-so-much" region.
Yup, my position is 2445/2415. But basically you show that most verticals around the money have negative delta, and again - how can that make sense?
Good question! I think most of us have not examined the "minimum" Theta point closely to comprehend why it is NOT located ATM, as one would normally assume. This point will change slightly from broker to broker depending on how they derive their Greeks, however, all will have a similar characteristic. That position (location of minimum Theta) IS inferred from the option pricing, not just some goofy error. I perform my own Greek calcs, and IV extraction from the BID/ASK and see same issue (slightly different inflection point). Perhaps some math guru, will chime in and clarify this with a "comprehendible notation"!