every historical behaviour of an underline is assumed to be priced into the its options - that's why "fast market" is a relative term that present a rare or low probability event for that specific underline (RMBS daily % swings will be "fast market" for MSFT) 2 things that might help: 1. do not trade near expiration. 2. you can add long gammas (buying options) to your position in order to survive a fast market or to hedge it against strong movements. Oded
what do you mean by long gamma? how exactly to reduce the impact of fast market? if you can clarify a bit more, thanks
Long Gamma means buying options instead of selling them. a trader that bought a straddle (long call + long put at the same strike and expiration) is more or less market neutral but long gamma - which means that a strong underline movement either up or down will create profits for that trader. My point is that in order to neutral your Delta you can use many strategies that either contain selling option or buying options or any combination of selling and buying (spreads). But a delta adjustment that bring long gamma to your position will take care better on fast markets risks - but like always in life (and specially in options trading ) there is a price: the longer gamma you are the shorter Theta you are. I hope I am not confusing you, some of the staff are intermediate level material and if you start your options trading journy you might take it slow so you can understand these concepts. Oded
if u are wnat to be long theta, then u are short vol, if u want to sell vol on 10 different positions, my one piece of advise is, BE CAREFUL THAT U DONT BLOW UP!
Thanks for the precious comments. however, if i would like to long gamma during the fast market, shall i buy at-the-money, or out- or in-the money? I mean i am not sure exactly how to choose which strike price to buy so to gamma neutral. Perhaps, is it possible or sensible to do gamma neutral during the fast market, because you'd never known when the market price is stopped jumping around.