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+756 Part VI: Measuring and Trading Volatility 
+Notice that the stock price is equal to the strike price (100). However, the deltas 
+are not at all equal. In fact, the delta of the call is 1.5 times that of the put (in absolute 
+value). One must buy three puts and two calls in order to have a delta-neutral posi­
+tion. 
+Most experienced option traders know that the delta of an at-the-money call is 
+somewhat higher than that of an at-the-money put. Consequently, they often esti­
+mate, without checking, that buying three puts and two calls produces a delta-neu­
+tral "straddle buy." However, consider a similar situation, but with a much higher 
+implied volatility- 110%, say. 
+AAA Common: 100; Implied Volatility: 110% 
+Option 
+AAA October 100 call 
+AAA October 1 00 put 
+Price 
+31.00 
+28.00 
+Delta 
+0.67 
+-0.33 
+The delta-neutral ratio here is two-to-one (67 divided by 33), not three-to-two 
+as in the earlier case - even though both stock prices are 100 and both sets of options 
+have six months remaining. This is a big difference in the delta-neutral ratio, espe­
+cially if one is trading a large quantity of options. This shows how different levels of 
+implied volatility can alter one's perception of what is a neutral position. It also points 
+out that one can't necessarily rely on his intuition; it is always best to check with a 
+model. 
+Carrying this thought a step further, one must be mindful of a change in implied 
+volatility if he wants to keep his position delta-neutral. If the implied volatility of AAA 
+options should drop significantly, the 2-to-l ratio will no longer be neutral, even if the 
+stock is still trading at 100. Hence, a trader wishing to remain delta-neutral must 
+monitor not only changes in stock price, but changes in implied volatility as well. For­
+more complex strategies, one will also find the delta-neutral ratio changing due to a 
+change in implied volatility. 
+The preceding examples summarize the major variables that might affect the 
+vega and also show how vega affects things other than itself, such as delta and, there­
+fore, delta neutrality. By the way, the vega of the underlying is zero; an increase in 
+implied volatility does not affect the price of the underlying instrument at all, in the­
+ory. In reality, if options get very expensive (i.e., implied volatility spikes up), that 
+usually brings traders into a stock and so the stock price will change. But that's not a 
+mathematical relationship, just a market cause-and-effect relationship.