long theta and long vega

Discussion in 'Options' started by johntsai90, Nov 9, 2009.

  1. long theta-long vega meant you'd earn money with time decay and if volatility increases.

    A long straddle will profit from time decay
    only with european style options that are very very deep in the money.
    Btw, this way the position remains long vega.
     
    #11     Nov 10, 2009
  2. dmo

    dmo

    Ha ha - leave it to you to keep me honest Maw :)

    What I meant - and should have clearly stated - is that absent interest rate and dividend considerations, if all your options have the same expiration, then if you are long vega you will be short theta and vice versa.

    And indeed, if you set the interest rate and dividend to zero in your example, it works out as I said it would. Try and see if you don't get the same.

    BTW Maw, what on earth are you trading? Those are some funky-ass strike prices!
     
    #12     Nov 10, 2009
  3. I was kidding Dmo, of course you're right :)
    The point is how interest rates and dividend are able to skew greeks.

    That's currency options, and once again, I agree 'those are some funky-ass strike prices' :p
     
    #13     Nov 10, 2009