Add training workflow, datasets, and runbook
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If Wal-Mart moves lower, the delta gets more positive, racking up losses
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at a higher rate. To add to Pete’s woes, theta becomes less of a benefit as the
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stock drifts lower. At $47 a share, theta is about flat. With Wal-Mart trading
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even lower than $47, the positive theta of the August call is overshadowed
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by the negative theta of the September. Theta can become negative, causing
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the position to lose value as time passes.
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A big move to the upside doesn’t help either. If Wal-Mart rises just a bit,
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the −0.323 gamma only lessens the benefit of the 0.563 delta. But above
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$50, negative gamma begins to cause the delta to become increasingly
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negative. Theta begins to wither away at higher stock prices as well.
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The place to be is right at $50. The delta is flat and theta is highest. As
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long as Wal-Mart finds its way up to this price by the third Friday of
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August, life is good for Pete.
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