Long Vega and Long Theta

Discussion in 'Options' started by samer1, Feb 28, 2012.

  1. samer1



    Does anybody know an option strategy that gives you a positive vega and a positive theta?

    The strategy should consist only of options with the same expiration, so calendar spreads are excluded...


  2. rmorse

    rmorse Sponsor

    Buy an ATM calendar. The further out the back month, the higher the net Vega. The closer to expiration the front month, the higher the net Theta.
  3. A $5-wide box for $4. An ATM fly with massive OTM skew.
  4. Hey samer can you give an example of an options trade and what you want to accomplish?
  5. samer1


    Hi ETNYC,

    Yes, I am looking for an option structure that profits from an increase in IV and that has a positive time decay as expiration comes closer.

    So if the IV goes up, the trade makes money. Example: long straddle
    The trade also makes money through time decay. Example: short straddle.

    However, it is important to note that the option structure has only options with the same expiration. Hence, no calendar....


  6. samer1


    Can you please show me an example?

    A wide box is an arbitrage trade, right?

  7. The only trade I can think of is:

    • Buy Deep OTM options for pennies or nickels.
    • Sell 1 strike OTM options for dollars.
  8. Fing brilliant. htf is that long vega?
  9. I hereby declare you the official troll of ET.

    It's been a pleasure feeding you.
  10. rmorse

    rmorse Sponsor

    The only way to do that without a calendar, is to buy a 1 X 2 put spread, where the ATM put you sell 1, and the OTM put you buy twice as many. It needs to be a credit spread. If the stock tanks, the OTM puts become ATM, you'll have +Vega on the down side. If the stock stays the same or goes up, your credit spread makes you money.
    #10     Feb 28, 2012