Tag Archive | "gamma"

The Missing Rally?

Thursday, September 18, 2008


Very strange and worrying sign today: the credit markets are finally starting to calm down, but we aren’t seeing the expected correlative pop in equities.  MS is down 41% at the moment, and GS is down 22%, and we just made a new low for the week on very strong volume.  The Fed is looking spent, S&P is talking about the US government’s AAA rating being threatened, nobody seems to want to pony up any more cash, etc. etc. This…

The Difference A Morning Makes

Thursday, September 4, 2008


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Market Neutral, Not Delta Neutral

Tuesday, August 12, 2008


There are plenty of ways to put on option trades that have a neutral outlook: straddles, strangles, condors, etc.  Whereas stock and futures traders are limited to whatever price action the market gives you, options let you take a view on implied volatility (vega), the passage of time (theta), and the rate of change of the rate of change of the option per unit move in the underlying (gamma).  Okay, that last one isn’t so obvious, but the idea is…

Option Strategies for Directionless Markets (Review)

Friday, July 25, 2008


Option Strategies for Directionless Markets: Trading with Butterflies, Iron Butterflies, and Condors Anthony J. Saliba, with Joseph C. Corona and Karen E. Johnson (Bloomberg Press: 2008) When traders are first exposed to spreading strategies like butterflies and iron condors, one of the first questions they always ask us is, “Can you recommend a book that goes into these strategies in more detail?  Where can I learn more?”  We’ve had to reply that there aren’t really any books that discuss iron…

June Monthly Review

Saturday, June 21, 2008


We feel like we’re saying this every month, but it sure feels nice not to have any skin in the game come expiration day.  Options expiration surely had something to do with the intensity of today’s selloff, and this was a textbook case of why we never hold positions into expiration. The fancy-pants phrase for the influence options expiration had today is “negative gamma.”  The practical significance of that phrase is that when we gapped down at the open, lots…

Short Gamma May Exacerbate the Rally

Wednesday, April 16, 2008


UPDATE: Adam makes basically the same point here. His comment at the end is that this morning’s sustained decline basically sucks the fuel out of any potential gamma fire, which is a good point. Sure, rallies like this are exciting, but on a medium-term view today’s action doesn’t prove much. We’re still within the recent trading ranges on all the major indexes, and although markets have really taken any good news as an excuse to rally and have shrugged…


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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