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seen Aug 20 at 4:12

Jun
13
awarded  Supporter
Mar
11
comment Delta Neutral / Gamma Neutral Positions
Addressing the last question re difference between ratio spread and straddle. A straddle will have a lot higher theta and also higher gamma/vega. It is a different bet that is also a lot riskier. On the other side a straddle is always done with debit while a gamma/vega-neutral ratio spread can be done with credit. Some traders use ratio spreads as an income strategy.
Mar
11
comment Delta Neutral / Gamma Neutral Positions
Re vomma-scalping: it is possible but transaction costs incurred by hedging delta, gamma and vega are high and the number of contracts traded should be high enough to maintain a gamma/vega-ratio. E.g. you would need to trade 100/117 contracts instead of 10/12 as in my example. Also simple BS models produce unreliable Vega and meaningless Vomma (volga) that could not be trusted for scalping. This is an institutional trading style and they do not do it as a primary strategy but just using it as a side effect.
Mar
11
comment Delta Neutral / Gamma Neutral Positions
A gamma-neutral spread will be close to vega-neutral - the shape of vega and gamma charts are very similar. There will be some delta and depending on the size of position it may be of consideration. You can fiddle with contract sizes and strikes to find an optimal delta/vega/gamma exposures that match your view of the market and your risk tolerance.
Mar
7
comment Delta Neutral / Gamma Neutral Positions
Vomma for Vega is like Gamma for Delta. Positive Vomma means that a Vega-neutral position makes money both in rising and falling volatility (if the rest of the risks removed). What you are saying is Vega - long Vega means gains with rising vol and losses with falling vol. Yes I agree that max Vomma is around 15% delta (or 1 stdev). Vomma is the measure of Vega convexity - if you take a look at a plot of Vega you'll notice that it's most steep around 1 stdev.
Mar
5
answered Delta Neutral / Gamma Neutral Positions
Mar
4
comment Pre-trade evaluation and risk assessment of option trading strategies (in market practice)
Long ATM call + short stock is a straddle. Your #2 and #3 are exactly the same then in terms of payoff. #1 as you put it now is the classical way to trade volatility. It'd recommend using #1 if you intend to hold to your position for days and #2/#3 for short plays. The difference between #2 and #3 is transaction costs and margin requirements so pick the one that best suits you.
Mar
3
answered Pre-trade evaluation and risk assessment of option trading strategies (in market practice)
Feb
13
awarded  Teacher
Feb
12
comment Estimate the market maker's price from the posted Bid/Ask and Trade price
Are you asking what is the fair (theoretical) price this market maker trades off? On the other note I think there's an error in your question. The MM bought at 181.77 not sold.
Feb
12
answered Lower bound of ITM Calls when computing Implied Volatility