Option Price moves against stock price

Discussion in 'Options' started by tdeel20, Jan 11, 2019.

  1. cvds16

    cvds16

    just for the record: you do know that the calls went more expensive in the 1987 crash ? All because of vol going through the roof ... options are not easy to understand and you need to know your greeks if you want to trade them ...
     
    #11     Jan 13, 2019
  2. The greeks are just derivatives with respect to the various components of an option's price. There may be (probably are) components that are not accounted for in the greeks. You can understand options without the greeks by having an intuition about how things move. Yes I know the quants are going to kill me, but case-in-point, call prices in 1987 did not increase because vega increased, but because shit was crazy and so vega increased as a result of it.

    Basically, the greeks reflect pricing only because everyone agrees that they do. Nothing natural says that option prices must be X. If you think black-scholes really represents the be-all-end-all of option pricing, I know for sure that's not true (I wrote option pricers). It's all bullshit and when shit hits the fan, no formula will save you, just good portfolio allocation.

    All that being said, it is very useful to talk about being foo-neutral.

    I'm just ranting, had an 8 hour drive today and it was mind numbing. On the other hand, I did get to listen to a cool African sci-fi audio book.
     
    #12     Jan 13, 2019
    guru likes this.