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training_data/curated/text/51a3b10dfdd56a6a6cb130a5179f548bdb5069afcc27fe5b700937096ddeb295.txt

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+Paul considers volatility. In this example, the JPMorgan ATM call, the
+August 50 (which is not shown here), is trading at 22.9 percent implied
+volatility. This is in line with the 20-day historical volatility, which is 23
+percent. The August IV appears to be reasonably in line with the September
+volatility, after accounting for vertical skew. The IV of the August 52.50
+calls is 1.5 points above that of the September 55 calls and the August 47.50
+put IV is 1.6 points below the September 45 put IV. It appears that neither
+month’s volatility is cheap or expensive.
+Exhibit 11.12 shows the trade’s greeks.
+EXHIBIT 11.12 10-lot JPMorgan August–September 45–47.50–52.50–55
+double diagonal.
+The analytics of this trade are similar to those of an iron condor.
+Immediate directional risk is almost nonexistent, as indicated by the delta.
+But gamma and theta are high, even higher than they would be if this were
+a straight September iron condor, although not as high as if this were an
+August iron condor.
+Vega is positive. Surely, if this were an August or a September iron
+condor, vega would be negative. In this example, Paul is indifferent as to
+whether vega is positive or negative because IV is fairly priced in terms of
+historical volatility and term structure. In fact, to play it close to the vest,
+Paul probably wants the smallest vega possible, in case of an IV move.
+Why take on the risk?
+The motivation for Paul’s double diagonal was purely theta. The
+volatilities were all in line. And this one-month spread can’t be rolled. If
+Paul were interested in rolling, he could have purchased longer-term