Hello David - On question 67.3 and 67.4, May I kindly request to provide the effect of gamma and theta. Also may I kindly request to provide the formulas for calculating Gamma, Vega and Theta.
To hedge options Greeks, we want to rely on the formula: +/- Quantity * %Greek = Position Greek, where a short position is represented by negative quantity. In this example, the market maker writes 10,000 ATM call options, each with percentage (per option) delta of 0.550 and gamma of 0.0440...
Position Greek = (+/-) Quantity * Percentage Greek. If we are short a call option, then we are short position delta and short position gamma. If we are short a put option, then we are long position delta (ie, negative quantity * negative delta = positive) and short position gamma (ie, negative...
I get when you calculate Delta Exposure you use = delta of the position * quantity
However, when you calculate gamma exposure why do you divide the result by 100 = (gamma of position * quantity)/100
The gamma and delta are direct output from kirk spread approximation.
Learning objectives: Explain how to implement and maintain a delta-neutral and a gamma-neutral position. Describe the relationship between delta, theta, gamma, and vega.
820.1. Trader Joe (who is unrelated to the awesome grocery store!) takes a long position in 100 out-of-the-money...
I.Portfolio Manager Sally has a position in 100 option contracts with the following Greeks, theta=+25000 , vega=+330000 and gamma = -200 . Which of the following additional trades, utilising generally ATM options will neutralise (hegde) the portfolio with respect to theta, vega and gamma ?
Just thought I would like to share how you actually loose money regardless of the direction of the underlying when you are short gamma (or convexity) by shorting an option.
∆a be the underlying shares (or bonds whatever)
we know convexity as ∆a+ 1/2 Г a^2
Thus, our net position will be ∆a -...