I am a option market maker. Say at some point in the time, I end up having only but ITM options in my portfolio and I want to reduce my risk exposure ( delta, Vega, gamma), what can I do to make profit out of those ITM options, or at least reduce the portfolio risk ? My question rises because I don't know what would be a good strategy to get rid of or to remain flat from the contribution of ITM options, I'm not sure to ever be hit around again soon regardless of how agressive I am with my spread. (For ATM and OTM options, I can manage to create some strategy to remain flat dealing with those products)

  • $\begingroup$ you can trade the corresponding OTM and then hedge the delta off with either futures or cash equities - you would be flat on all greeks $\endgroup$
    – nimbus3000
    May 17, 2022 at 18:13
  • $\begingroup$ That's what I would do, but fact is I would like to have a minimal delta exposure, so that I would try to remain somewhat gamma neutral or to have small delta position. For OTM options, I can create some risk reversal, for ATM options, I can hope my position balance out if I suppose ATM IV Is mean reverting, but I'm looking forward to what could be done specifically for ITM options, I would guess I can try to create some calendar spread if I look to the term structure. Usually volumes for ITM are low because of the premiums, but I wonder what I would do If I had some in my book. $\endgroup$
    – Kupoc
    May 18, 2022 at 7:35


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