In light of the low VIX levels nowadays, which (4 legged) ‘animal’ has negative Delta, positive Theta and positive Vega?
Look at out of the money calendarized butterfly spreads in puts, for example. For single names, look for term structure inversion with decent skew for ideas on trade construction according to your inputs.
Thank you Maximum, The term structure is surely informative on the Vega, but controlling for a positive Theta appears to be a bit tricky, I think...
The issue is that a long option always has +vega and -theta, while a short gets +theta and - vega. You can have them both positive only with a calendar spread of sorts, and even in that case you will never have them both massively positive. Also, positive theta in a calendar kind of fools you, I actually never noticed that day-by-day value increase, the changes in volatility and price always overstate the minimal theta you get.
Yes, the time-spreads are the key for these, and b/c of these points that I posed my original question on "do such (4-legged) 'animals' exit"? The answer is affirmative.. if you can find them... But if you do, you might be able to benefit from a substantially positive vega accompanied with a decent negative delta (relatively speaking, of course) and having some positive theta to help along -- and all this with almost no gamma risk...In this low vol environment, I think we all (i.e. premium sellers) should be adding them, if we could, to our inventory, and doing so without 'damaging' (or "diminishing") the positive theta that we are stacking on......
Buy a ATMx1/OTMx2/OTMx1 butterfly when spx skew is relatively high you can position it to be long gamma, vega and theta with negative delta. Here is an example (obviously dont trust your broker to give you accurate vols and greeks, use a software/programming language to figure it out). Skew theta is why we are able to get this greek profile. The strategy has a very similar profile to a down and out barrier option above the short strike.
@TheBigShort good point, I would add however that the greeks on the butterfly tend to invert while the thing moves in the money. Here you start with +vega + gamma because the structure is mostly otm, but as spot gets closer both gamma and vega flip to negative. It's the butterfly way of telling you: "ok I like it here, now stop moving so fast please.."
@TheBigShort thank you for looking into this — this BF does exploit the skew to have this Greek profile, though @Baozi is making a good point about the ‘sensitivity’ of BF to the spot’s movement. From your example(when you priced it) it appears that you were able to ‘buy’ 10 Vegas (@ VIX points) for about $3.5k which — would that considered as a ‘fair price’ for buying Vega? In this regard, Here is some posting from @TradeAlert https://www.facebook.com/294115363169/posts/10156691804008170?sfns=mo BTW, I read through some older threads — kudus to the Kellogg call..