Option Delta-Alpha

Discussion in 'Options' started by RedEyeFly, Apr 17, 2010.

  1. Came across in my reading today - the concept of 'Delta-Alpha' - Can anyone expand on this?
     
  2. What did the reading say?
     
  3. That's the problem, it was a flash used term without context or definition. Because delta is first order, I'm having trouble envisioning what the alpha on delta would be.
     
  4. Alpha is often synonymous with gains. Possible Delta-gains would work.
     
  5. From ivolatility.com

    "Alpha - Alpha is a ratio of Gamma over Theta. Thus Alpha indicates the relative value of owning gamma relative to the current level of theta. Alpha has been described as a "bang for your buck" measure. It is a measure that allows for comparison of several different options on the basis of how much they cost daily to own (daily Theta) versus the potential gamma derived return (profits from movement) from owning them. The greater absolute value of Alpha the more potential for profits exists against the loss from Theta for long positions. The converse is true for short positions. "