Questions tagged [option-strategies]
The option-strategies tag has no usage guidance.
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Which option strikes are better to sell for mean reversion strategies [closed]
Suppose I have an underlying with following values:
Spot Price: 100 Average: 98
Now let's say this stock goes to 108 and according to systematic evaluation it is overbought. I want to take a short ...
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P/L of a position described in terms of Up-Gamma and Down-Gamma
I can't visualize the profit/loss of a position described in terms of its Up-Gamma and Down-Gamma. The question arise from pag. 193 of Dynamic Hedging by Taleb.
How would you describe a position that ...
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Delta hedge swaption straddle
Let's say you decide to buy a 2Y10Y ATM swaption straddle (i.e. buy 10 million ATM payer swaption and buy 10 million ATM receiver swaption).
In order to delta hedge, I believe you would short the ...
CommunityBot
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Potential arbitrage opportunity or fallacy?
Suppose we have two European options with the same expiration: a call priced at $c$ with strike price $K_1$ and a put priced at $p$ with $K_2 (>K_1)$. Further, suppose the zero-points of the two ...
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Approximation of an Autocall (trigger 100%) with ATM options prices
thank you very much for trying to answer this question, and I hope it will be helpful to everyone in my situation.
I am preparing for an interview, and I've come across these three questions on the ...
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P/L table for a delta hedged position
I am trying to replicate the table at pag. 119 of Dynamic Hedging by N. Taleb with no success. In the example called "A misleading delta" an operator has the following position:
long \$1 ...
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Risk management tools for long term Gamma/Vega sellers subject to margin calls
TL;DR: if you're a retail investor and you systematically sell long-term vertical spreads while staying Delta-neutral, your main risk comes from Vega and the Gamma of opening gaps that can throw you ...
CommunityBot
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How to conclude which option is overpriced (by using implied volatility)
I have a small question regarding how to conclude which option is more overpriced?
See the following table
Option Theoretical Value
Option Price
Option Implied Volatility
7.00
8.00
26%
6.00
6.75
28%...
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PnL of a delta-hedged straddle
On Twitter, this question has been making the rounds:
If you sold a 30 vol for a one year out at the money straddle, have access to free, perfect, and continuous delta hedging, and stock realizes a ...
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Setting Bid-ask for option forward-type strips
do you know if there is any methodology on how to define spreads when fx option market maker is trying to quote for exaple various fx forward strip strategies?
From bbg ovml or software which we are ...
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Reverse convertible coupon determination
I had a question about the coupon level determination for a simple reverse convertible product.
Assuming risk free rates are 4% while premium on short put is 5%, typical text-books would then quote ...
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We can forecast the direction of (constant maturity) implied vol of various indices well. Is that useful?
We've been financial building ML models for years, and have multiple portfolios live - but we're new to the volatility space, none of us are options traders.
How could we effectively use implied vol ...
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Are there any good tools for back testing options strategies?
There are all kinds of tools for backtesting linear instruments (like stocks or stock indices). It is a completely different story when it comes to option strategies. Most of the tools used are ...
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What really is Gamma scalping?
How does Gamma scalping really work? It seems there is no true profit scalped. If we look at the simplest scenario, Black-Scholes option price $V(t,S)$ at time $t$ and the underlying stock price at $S$...
CommunityBot
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Constructing payoff with options
Suppose that COMPANY A has issued a special bond that does not pay any coupons. At maturity T, the bondholder receives the principal (face value) equal to 1,000 plus an additional ...
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