Tag Archive | "gamma"

The Gamma Problem for Straddles, Or Why VIX Futures Are Necessary

Monday, November 11, 2013

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One of the frustrating things about buying straddles is that the more correct you are, and the more quickly you are proven correct, the more quickly your position loses the ability to profit from volatility. A straddle opened as a bet on volatility quickly becomes a simple long/short bet on the underlying asset: straddles run out of gamma too quickly. A straddle is a position comprised of one call and one put on the same underlying asset with the same…

When short gamma trading is your only hope

Tuesday, April 23, 2013


From early March through last Friday, there were really only a few ways to make any profits in the S&P 500, and looking at which strategies have been working gives us a good sense for the character of this market. First, let’s take a look at price action over this period. SPX went basically nowhere: Fig. 1. S&P 500 Index, March 6 – April 18. Source: CBOE Now, trading strategies can be classified according to the source of their risks/returns, meaning…

Democracy is a random gamma-generating machine

Thursday, May 17, 2012


A few weeks ago, his thoughts about the world were of no consequence to anyone outside of Greece. Now, the leader of one of Greece’s political parties can move markets with a strong word or two. Democracy is a random gamma-generating machine. Alexis Tsipras is the leader of Syriza, the anti-austerity party that finished in second place in Greece’s election on May 6. Syriza is expected to finish in first place in the upcoming June 17 election. On Wednesday,…

Q2 2011 Condor Options Performance Review

Tuesday, June 21, 2011

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The Condor Options newsletter portfolio returned nearly 16% in the second quarter of this year, compared with -0.60% for the S&P 500. The newsletter is also more than six percentage points ahead of the index year to date. Finally, the newsletter portfolio reached a new all-time high in June, something that few indexes or assets can claim. I noted in my last quarterly update that I expected more periods of sideways price action in the rest of 2011, and so…

On Gamma and Holding Positions Through Expiration

Wednesday, November 25, 2009

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One of the most popular posts I’ve written is “The Bucking Gamma Bull,” in which I said: Think of your deltas as a mechanical bull, and your gammas as the rate and intensity at which the bull throws you around.  The ride starts off quietly, but as time goes on the bull gets increasingly difficult to ride, and eventually you’re likely to be thrown.  That’s exactly what happens during an expiration week in which the underlying…

Holding Options to Expiration

Tuesday, March 24, 2009


A reader asked us recently about our preference for closing out option spreads prior to expiration.  To review, we usually close out any positions that are short gamma at least a few days – and often up to a week – before they expire, since the exponential increase in gamma near expiration makes those positions more difficult to manage.  The question was about the how the performance of our strategy would have been affected had we held all positions…

Gamma Quiz Answer

Monday, February 16, 2009


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Gamma Quiz

Wednesday, February 11, 2009


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The Bucking Gamma Bull

Wednesday, January 7, 2009

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We’ve mentioned before that our preference is to close out short option positions before the dynamics of expiration week have a chance to kick in.  In a nutshell, while it’s true that theta declines more quickly as expiration looms, tempting option shorts to hold on as long as possible, it is also true that gamma rises more quickly closer to expiration, as shown below. There is no one right answer about how to trade expiration.  But if…

Three Theses on Volatility

Wednesday, October 22, 2008

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Following up on our recent post about VIX futures, a reader asked: If you want to get short volatility, why not just sell some of those VIX futures here, or maybe a vertical spread of VIX options?  Why mess around with equity indexes at all? Good question.  The difference depends on what you mean by “volatility.”  VIX futures are a pure vega play, which is to say that they give you exposure to changes in implied volatility, but that’s…


Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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