When shorting options til expiration, does IV really matter?

Discussion in 'Options' started by TskTsk, Jan 31, 2012.

  1. taowave

    taowave

    As long as you dont meet the" god of size",you can certainly take that approach.

    Obviuosly,you arent trading with price stops and are willing to take down the asset..


     
    #11     Jan 31, 2012
  2. That isn't at all what I'm saying...
     
    #12     Jan 31, 2012
  3. TskTsk

    TskTsk

    You're right, I misread. I agree delta-hedging will realize IVs above 0 within expiration.

    Also, as far as I understand now, IVs wont affect the delta hedging P/L at all, since vega is separate from gamma/delta...but then theres the higher order issues (vanna etc) which we talked about yesterday, but that was negligible I believe the conclusion was

    Now, if I could only figure out a way to measure how that damned vega affects my portfolio P/L...
     
    #13     Jan 31, 2012
  4. J-Law

    J-Law

    If ur long gamma, then you're short theta
    If us short gamma, then you're long theta

    So...

    If your're long options, then ur long gamma/short theta.
    If you're short options, then ur short gamma/long theta.

    Always inverse. Unless, there is some crazy new fangled, multi legged trade that I'm unaware of. But, those two greeks are always inverse. The things I remember from class :)
     
    #14     Jan 31, 2012
  5. TskTsk

    TskTsk

    Positively correlated when looking away from plus and minus signs :)
    As in higher (positive) theta equals higher (negative) gamma, and vice versa.
     
    #15     Jan 31, 2012