Option pnl

Discussion in 'Options' started by clarodina, Nov 7, 2016.

  1. How accurate using taylor to estimate option pnl? Heard that under some situation taylor is insufficient
     
  2. Robert Morse

    Robert Morse Sponsor

    What is Taylor?
     
  3. Zzzz1

    Zzzz1

    For higher order risk you need other metrics.

     
  4. Egads, retail traders pretending to run huge option books where they have to monitor 2d/3d level Greeks....
     
  5. Zzzz1

    Zzzz1

    You are omitting that every now and then an institutional junior gets lost on the site. What's wrong with sharing some of the experience. I find this question way better than all that fibonacci and technical analysis crap. OP could probably add some context to make clearer what he is after.

    I sense that recently all sorts of bullshit is worshipped at and each week some new self declared stock trading gods are emerging with their crazy calls and predictions that totally crash a few days or weeks later, yet sound advice , just because it comes from the mouths of those who work or worked in banks or hedge funds seems frowned upon. Jealousy or anger?

     
    Deuteronomy_24_7 likes this.
  6. The Taylor series expansion is an approximation, which is plenty accurate in a majority of contexts. That said, it's, obviously, an approximation.

    There's quite a bit of literature on the specific aspects of the accuracy of this methodology.
     
    Zzzz1 likes this.
  7. Approximation? Whats the error% typically? Other better methods to do the option pnl?
     
  8. Zzzz1

    Zzzz1

    You really need to provide more information. Which options precisely? How many?

     
  9. sle

    sle

    Tailor expansion is just a method of extrapolation using your derivatives up to the Nth order. You can make it arbitrarily precise depending on which derivatives you include, e.g. you can include all sort of secondary greeks to make your risk better during bigger moves. People used to run large exotics books using overnight calcs and interpolating risk through the day, though it works rather poorly for some specific cases.
     
    #10     Nov 8, 2016