# Tagged Questions

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### volatility grouping

I was working on risk levels of a combined portolfio (includes options,futures as well as stock). While using greeks we can asses some value of a portolio, but when one needs to assess some kind of ...
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I am in the process of analyzing historical options data, and I keep finding options that mysteriously disappear before they are due to expire. For example: For the QQQ $69 Put, ... 2answers 105 views ### Why long power and short gas for Merchant power plant Merchant power plant is one that can be turned on whenever you want. Suppose it is generating electricity from natural gas and we have a spark-spread option. Why is that the person who owns plant is ... 1answer 168 views ### Given future price probability distribution, what is a strategy that maximizes return? Say I know the price probability distribution, e.g., lognormal(p,s), of a stock X at a future time ... 2answers 235 views ### Algorithmical replication of a profit and loss function using different options I often see questions like "Given this payoff graph (example below), construct a portfolio that replicates it." I want to know if there is an efficient method/algorithm to find the individual pieces ... 0answers 48 views ### Binary options and European option is similar? European options and binary (digital) options is similar? How apply the Black & Scholes formula on binary option? 1answer 316 views ### Risk-free investment strategy for european call and put option I have some trouble solving the following question: We have an european call and put option (with the same maturity date$T$en strike$E=10$). The stock price now is$S=11$and we use a continuous ... 1answer 205 views ### Calculating Greeks in Covered Calls? Just want to confirm whether Delta, Gamma, Theta, Vega will be calculated in the following way? Since we own 100 shares of stock while selling a call we need to subtract greek value from one? right? ... 1answer 171 views ### stock option strategies long vs short What makes an option strategy long or short? I got the impression that if it is a net debit (you pay to open the strategy) it is classified 'long' (strangle, straddle) Then I learned about the call ... 2answers 186 views ### What is most reasonable approach to determine side of a multi-leg options order? Say, 4-legged multi-leg options order with below leg ... 1answer 2k views ### Seagull option strategy - clear example It looks like the subject of seagull option strategy is not as clearly explained as for other strategies (butterly, bull,bear spread). Thus, can someone provide a clear example of what you buy and ... 1answer 112 views ### Symmetry of option-implied probability density I was wondering whether the option implied probability density of the log returns:$x = \ln\left(\frac{S}{S_0}\right)$with S the value of a certain stock, is always symmetric ? I was asking myself ... 1answer 148 views ### Floor and Cap problem So I have a problem from Marcel Finan's "A Basic Course in the Theory of Interest and Derivative Markets." We are going over floors and caps, covered puts and covered calls. Consider the following ... 1answer 126 views ### Hedging differences between equity and index options? Suppose we hedge an index option using futures on that index. How would the hedging strategy be different if the underlying could be traded directly (from a risk point of view)? 1answer 2k views ### Call option arbitrage opportunity I am having trouble wrapping my head around some text provided to us by our lecturer (unfortunately he is currently unavailable). If we let$c$be the price of a European call option,$S_0$the ... 0answers 272 views ### Call options portfolio: what would the underlyings' moments to be maximized? Let you have only three underlyings, like SPY, TLT and GLD, and you want to buy$n_{1}$Call options on SPY,$n_{2}$Call options on TLT and$n_{3}\$ Call options on GLD... with a limited budget, that ...
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If a linear sum of options is constructed such that the premium payout is zero, then does it mean that resultant greeks of the cumulated options positions will be nearly zero. For simplicity, lets ...
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### What is the Benefit of holding a short option?

i am new to corporate finance and ask myself why a investor is interested in being short on a Option? The only he can win is a premium but he can loose much more. I understand with being a short I can ...
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### statistical arbitrage option overlay strategies / volatility trading

Here's an interesting trading puzzle that I would love to get the community's input on. Let's say there exists an alpha signal that does a good job of sorting equities expected excess returns over ...
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### How to calculate the most realistic historical option prices with additional publicly available parameters

This is a follow up question of this one. My aim is to create the most realistic historical option prices possible with publicly available data. I want to do this for backtesting purposes. The ...
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### What benchmark/index to use for backtesting a portfolio of stock options?

What benchmark should I use for backtesting a model for when I should buy an option of a particular stock? For equities, one could say their portfolio outperformed the S&P 500. I would like to ...
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### True or False? An option's price will always be greater than or equal to its intrinsic value

Since if the option's price is lower than its intrinsic value (eg. strike price - current stock price for puts), then an arbitrage opportunity arises from buying the option at bargain and then ...
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### How to hedge a bull call spread

I am trying to make a theoretical hedge to a bull call spread. (buy out the money call, sell further out the money call) What I have now is almost effective but there is one possible 80% loss ...
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### Analysis of Unbalanced Covered Calls

Hello I am doing an analysis on covered calls with and extra amount of naked calls. Ignore the symbol and current macroeconomic events. I couldn't find any reference to this strategy (unbalanced is ...
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### Are there comprehensive analyses of theta decay in weekly options?

Are there comprehensive analyses of how much theta a weekly options loses in a day, per day? I know what the shape of theta decay looks like, in theory, where the decay towards zero happens more ...
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### Options: Vertical LEAPS

I am developing an algorithm and it needs to know what to do in certain market conditions It takes on a Vertical Bull Call Debit Spread on LEAPS that are 12+ months out in the future. This means that ...
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### In a covered call strategy, should I hold the call or sell/roll if the delta becomes too small?

I am tweaking a covered call algorithm. The short leg consists of out of the money call options. The goal is to collect the tim premium, but an equally favorable circumstance is when the call ...
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### Can you replicate an option on an arbitrary basket of stocks?

Since a market index is nothing more than a basket of stocks, you can create your own index by putting together stocks of your choice. The only difference is that you can trade options on major ...
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### What is the average Sharpe ratio of volatility arbitrage funds?

Where can I get data on performance metrics for volatility arbitrage funds? I am trying to compare the Sharpe ratio of my strategy to those of the major players.
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### Skew arbitrage: How can you realize the skewness of the underlying?

It's not clear to me how to realize skewness. In other words, how do you implement skew arbitrage? There seems to be no well-known recipe like in volatility arbitrage. Volatility arbitrage (or ...
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### How can I learn about the quantitative aspects of market making in illiquid single stock options?

I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
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I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
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### Transparent quant products with real track record

A real track record is better than backtesting! I am looking for products, funds, certificates, indices etc. that are based on quantitative trading strategies where the strategies and performance ...