{"id":22,"date":"2009-12-17T18:48:53","date_gmt":"2009-12-17T18:48:53","guid":{"rendered":"http:\/\/dailyma.com\/faq\/questions-about-the-greeks\/"},"modified":"2010-02-09T01:43:37","modified_gmt":"2010-02-09T01:43:37","slug":"questions-about-the-greeks","status":"publish","type":"post","link":"http:\/\/dailyma.com\/faq\/questions-about-the-greeks\/","title":{"rendered":"Questions about the Greeks"},"content":{"rendered":"

QUES: In your trading experience with both the iron condors and double calendar spreads have you found it any more advantageous to theta scalp if I have time daily to monitor?<\/strong><\/p>\n

ANS: I don’t theta scalp a double calendar or an iron condor since they already have long calls or puts that protects your position while theta is collected. I will typically only theta scalp by selling a straddle or strangle. Then buy or sell the stock or etf to offset the delta\/gamma risk.<\/p>\n

QUES: My own experience is that theta scalping (even at 250 or 300 delta
\nintervals) have not routinely produced _greater profitability_ vs adjusting via spreads near\/around the break-even zones.<\/strong><\/p>\n

ANS: I agree. It is not as profitable as adjusting spreads at break-even points.<\/p>\n

QUES: I am a very active gamma trader and have been employing my own gamma\/theta\/volatility algorithm to adjust my gamma positions.<\/strong><\/p>\n

ANS: I have recently been using a formula that has helped determine when to adjust deltas based on volatility and estimated moves of the stock rather than intervals of 250-300 deltas. I have found it to be excellent. Feel free to test it for yourself.<\/p>\n

I’d be interested in your algorithm, if you’re willing to share.<\/p>\n

The formula I’m using is simply this: E= ([V\/16]*St)*R<\/p>\n

16 is the sqrt of 256= the average number of trading days in a 1 year period.
\nV= Volatility (expressed as a percentage), E= Estimated Move of the Stock or ETF on any given day, St=Stock Price, R=Risk Tolerance (the amount of risk you want to assume above an estimated one day move in the stock before hedging deltas. This can be 1,2 or 3 or 4. I don’t recommend a R value above 4)<\/p>\n

If I was selling a straddle:
\nV=.2054
\nSt=50.00
\nR=2<\/p>\n

Then
\nE= ([.2054\/16]*50)*2
\nE= 1.28<\/p>\n

So, on this day, I would make an adjustment only after a move of 1.28 based on a R value of 2 on the stock or etf on that day and recalculate for the next day based on price change and volatility change.<\/p>\n

Closing is easy. I close the position when the theta collapses.<\/p>\n","protected":false},"excerpt":{"rendered":"

QUES: In your trading experience with both the iron condors and double calendar spreads have you found it any more advantageous to theta scalp if I have time daily to monitor? ANS: I don’t theta scalp a double calendar or an iron condor since they already have long calls or puts that protects your position … Continue reading “Questions about the Greeks”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,1,11,5],"tags":[],"class_list":["post-22","post","type-post","status-publish","format-standard","hentry","category-double-calendars","category-iron-condors","category-the-greeks","category-theta-scalping"],"_links":{"self":[{"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/posts\/22","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/comments?post=22"}],"version-history":[{"count":0,"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/posts\/22\/revisions"}],"wp:attachment":[{"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/media?parent=22"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/categories?post=22"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/dailyma.com\/faq\/wp-json\/wp\/v2\/tags?post=22"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}