Option Pricing Fundamentals


Delta: 1st d of option relative to the underlying.


Theta: is the negative of the first derivative of the option respect to the time remaining until exp.  Also known as TIME DECAY.


Vega: is the 1st derivative of an option respect to the volatility [stdev] of the underlying. Also known as kappa, lambda, sigma.


Rho: 1st derivative  of an option respect to the interest rate. Calls: +. Puts: -. In general options are not very sensitive to rho.


Gamma: Does not measure sensitivity to underlying’s price like the above. Instead, measures how delta changes with changes in the underlying’s price. The gamma for a C or a P is the same, always, and can be either positive or negative. Gamma is the second derivative of the option price with respect to the stock price.


Next post is about option strategies.


Fuente: Fut, Op +Swps, Robert Kolb. 3rd ed.


¿Como se relacionará el Vega con el ATR?

Calculo de real time for delta y vega para sacar estrategias o ponderar probabilidades para el underlying.



Cuando compré el CLM9-9000C no solo esta deep out of the money, tambien el vega es bajísimo porque el crudo esta atrapado en un rango aburridísimo. Too late, pero lo mejor habria sido irse con el gamma: sell options out of the money covering blackswans.

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