1
$\begingroup$

I am backtesting this Iron Condor before earnings.

In the position summary Vega (Mid Quote) is -3.04\$ but in the chart below (IV vs Profit $) it's clearly shown that a decrease in volatility will not provide any profits.

The next day (after a -12% stock move) Vega turned positive. How is that possible?

enter image description here enter image description here

enter image description here

$\endgroup$
2
$\begingroup$

Just to be clear: please provide the 2 dates you are pricing your package at and the values of the spot and IV on each of those pricings.

Also you are pricing very short dated options immediately before earnings and there was very sharpe move (unsurprisingly). So it seems pretty clear that your greeks will move!

It is obvious you need to perform some earnings scenario analysis before putting up short date structure like this.

Also greeks are model dependent and those are american options do you know anything about your pricer ?

Eventually it is unclear the meaning of your “IV vs profit” plot. There are 4 options involved here.

All in all it seems you are providing very partial information so conditional on what you gave, everything is possible

$\endgroup$

Your Answer

By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service, privacy policy and cookie policy, and that your continued use of the website is subject to these policies.

Not the answer you're looking for? Browse other questions tagged or ask your own question.