theta per gamma ratio

Discussion in 'Options' started by adamchubb, Oct 15, 2020.

  1. does this ratio make sense (theta / gamma) as a gauge of gamma risk??
     
  2. taowave

    taowave

    If nothing else it should make intuitive sense..

    Obviously if you are long gamma,you would like to pay "low rent",and if short gamma you want to charge a boatload..

    Low rent = low theta/high gamma

    High rent= high theta/low gamma
     
  3. tommcginnis

    tommcginnis

    Very handy reward/risk measure.

    Put it into words that anyone can understand, and see if you can explain every part of your option inventory/portfolio with it -- including spreads.

    Be aware of the graphs of each, and what they can contribute to your use/knowledge as the market moves (or expiration draws nigh).

    I run 5 market alarms generally, and this is one. So, :thumbsup::thumbsup:.
     
  4. newwurldmn

    newwurldmn

    it’s called implied vol.
     
    Justrade likes this.
  5. taowave

    taowave

    Lol...yes indeed..

    But it is a good exercise to see the IV effect on theta/gamma