Questions tagged [gamma]

The tag has no usage guidance.

17 questions with no upvoted or accepted answers
Filter by
Sorted by
Tagged with
6
votes
0answers
2k views

Gamma Imbalance / Exposure

I am currently writing my thesis about the lack of volatility / changing market structure we see nowadays on the financial market. I believe an important factor in this development is the delta-...
3
votes
0answers
90 views

Intraday Value at Risk approximations

We use full valuation of derivatives portfolios using scenarios from historical data. For simple contracts, this is relatively fast. For contracts requiring monte carlo simulation, this becomes ...
2
votes
0answers
78 views

Are there trades that long gamma (convexity) and short volatility at the same time?

Likewise, are there trades that short gamma and long volatility at the same time? Under fixed income context, are there trades that short convexity and long volatility at the same time?
2
votes
0answers
685 views

Gamma PnL Formula and Break-Even volatility

When we derive the P&L of a delta hedged option we obtain: $$ \text{P&L}=\dfrac{1}{2}\Gamma(\delta S)^{2}-\theta\delta t $$ and setting equal to zero and rearranging we obtain: $$ \dfrac{1}{...
2
votes
0answers
163 views

Beginner question on Black Scholes

Would you please confirm whether my understanding is correct please? (Sorry a lot of questions...) 1) BS is derived based on the assumption that during an infinitesimal time, we can replicate the ...
2
votes
0answers
48 views

Calculate latest underlying price (or option), given new option (or underlying) market price?

Given a reference underlying price, reference option price, delta and gamma, if I receive a new underlying/option price what equation should I use to calculate the respective option/underlying price (...
2
votes
0answers
61 views

What should $T$ be when gamma trading?

I am studying some gamma trading, and there's one thing I don't understand. On the option we are hedging, what should its expiry $T$ be, and for how long should we do the trade? What I mean is, is it ...
2
votes
0answers
109 views

Testing for the presence of a positive or negative gamma effect

I am currently analyzing a statistic that I believe will have the effect of hedgers having a positive or negative gamma position in certain stocks. In the case where I believe hedgers have positive ...
1
vote
0answers
62 views

How to use gamma theta and theta gamma ratios for managing short positions?

I'm starting to sell ATM options in order to buy the tails, and I would like to know how to use gamma/theta or theta/gamma ratio or their sum to manage and exit the short position before the gamma ...
1
vote
0answers
77 views

Vega hedging swaption with caplets - precisely, what will go wrong?

I am trying to form a kind of unified perspective of how (vega) hedging an exotic with vanillas, or hedging a 'basket option' with vanillas will go wrong. So in particular, I want to be able to ...
1
vote
0answers
147 views

Can prediction of realized volatility for next day improve delta hedging (gamma scalping)?

Im quite confused. As I understand from standard delta PNL of option + underlying position, pnl is equals to difference between realized and implied vol weighted by gamma. However, as I understood, ...
1
vote
0answers
105 views

gamma-weighted SOIR

I came across a term 'gamma-weighted SOIR' several times recently. it seem like an old term on gamma imbalance. could someone care to explain what this is and the rationale behind it?
1
vote
0answers
2k views

Short Call Hedge. Options and gamma trading

Let’s say a trader sells a Short Call with strike 100 (for making profit with the premium) at-the-money (for highest extrinsic value there). For hedging until expiration, he buys the underlying share ...
1
vote
0answers
74 views

Stress Test for gamma FX portfolios?

How can I create scenarios to stress gamma FX portfolios? If I shock the underlying for example +/-10%, then I gain in both scenarios. I get to capture some losses if I shock the implied volatility. ...
0
votes
0answers
122 views

Why is this investment strategy negative gamma?

I know the basics about options greeks, but I heard traders extrapolating the concept to portfolios composed not just of options. Providing liquidity on Uniswap, an automated market maker (AMM) built ...
0
votes
0answers
40 views

Reference request for equity index gamma modeling

I read this article a while ago https://www.zerohedge.com/markets/all-you-ever-wanted-know-about-gamma-op-ex-and-option-driven-equity-flows and i've found a lot of success trading options using these ...
0
votes
0answers
90 views

Vega vs Gamma. Implied vs realized vol

I was reading the answers to this question: Long Gamma vs Vega , but I still I feel I am missing a bit of context. Let's say I am long an European call today. From the plots shown in the second ...