Karen the Supertrader - TastyTrade Hybrid Experiment

Discussion in 'Journals' started by Sweet Bobby, May 18, 2016.

  1. Point well taken, Maverick. Thanks for your comments. I actually do like maintaining a daily theta goal, but that's just me.

    Have a great weekend!

    Bobby
     
    #171     Jun 3, 2016
  2. Maverick74

    Maverick74

    Bobby, theta does not exist. It's a 2nd derivative. It's a calculus equation. A pde to be more exact (partial differential equation).
     
    #172     Jun 3, 2016
  3. isotope

    isotope

    I don't mean to be pedantic, but please correct me if I am wrong. I thought theta is a first order Greek.
     
    #173     Jun 3, 2016
    iprome likes this.
  4. F_488

    F_488

    Maverick I read in another thread you said selling ATM Straddles is a lot better strategy than selling DOTM options. For a novice Option Trader trying to sell premium, what rules would you apply to trading the ATM Straddles.
     
    #174     Jun 3, 2016
  5. Maverick74

    Maverick74

    It's not better. It's safer in that you are selling peak gamma. In other words, as the market moves against you,it's doing this with a declining gamma curve which is exactly what you want vs the inverse which is the market moving against you with gamma exploding in your face. There is no "edge" to selling ATM premium, it's just easier to manage and hedge.
     
    #175     Jun 3, 2016
    ironchef and i960 like this.
  6. I like straddles as well and I have one on in this experimental portfolio.
     
    #176     Jun 3, 2016
  7. Maverick74

    Maverick74

    It can be either. Every greek has 2nd and even third order effects.
     
    #177     Jun 3, 2016
  8. Maverick74

    Maverick74

    It's not about liking them bobby. It's about understanding them. I sound like Confucius.
     
    #178     Jun 3, 2016
    CBC likes this.
  9. isotope

    isotope

    Sorry, I am confused and lost. Can you please elaborate on the 2nd and 3rd order effects of theta? If the explanation is too tedious, please give me pointers to academic literature or papers. I shall do the reading myself. Thank you in advance.
     
    #179     Jun 3, 2016
  10. Maverick74

    Maverick74

    Sure, theta is not static, it changes relative to other things other then time. For example, theta changes with regards to vol, price and even skew. ALL derivatives has 2nd and 3rd order effects which is EXACTLY why retail traders should not rely on them. A pde is simply a measurement of a variable holding ALL ELSE CONSTANT. That does not exist in the real world. ALL other parts are moving and are not held constant which is why technically you need to understand 2nd and 3rd order effects.

    Want a book? Fine, you can pick up a copy of "Dynamic Hedging" by Taleb.
     
    #180     Jun 3, 2016