Option premium hardly moving with underlying price

Discussion in 'Options' started by GotherL, Dec 2, 2020.

  1. umbolox

    umbolox

    The reason why calls do not move when prices raise is a combined effect of:
    - delta
    - volatility
    and their second level vanna and vomma

    You may review the greeks as first instance:



    And then understand the difference between implied volatility and expected volatility:

     
    #11     Dec 3, 2020
  2. TimMykes

    TimMykes

    does your 'member' tell you about all the times he goes to zero ?

    limp as it were
     
    #12     Dec 3, 2020
  3. If you are making a directional bet on an expected underlying move, but do NOT have confidence on the changes to IV, you may be best served to limit your choices to what you have confidence in! Why place a trade that is more a function of IV than underlying if that is not your area of expertise? If you wish to use options and you are considering ATM strikes... May be interesting to consider nullifying the impact of IV by selling the same strike PUT for the directional play. Since ATM strikes have similar IV, you cancel out that impact. To constrain your risk, you can couple that Short strike position with a LONG placed at a distance (width) that provides comfort to suit your needs. (the wider the width of that PUT vertical), the more the trade will respond to a pure price move, but may take more margin than you wish.
     
    #13     Dec 3, 2020
    Justrade likes this.