29 lines
1.1 KiB
Plaintext
29 lines
1.1 KiB
Plaintext
Chapter 40: Advanced Concepts
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FIGURE 40-19.
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Trading long gamma, 11 conventional" calendar.
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7500
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5000
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2500
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fJ)
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fJ)
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.3 :;:, 0 '§ 45 50 Q.
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-2500
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-5000 At March Expiration
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-7500
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Stock Price
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901
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75
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much risk of time decay. A second attempt was made, introducing positive volatility
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into the situation, but that didn't seem to help much. Finally, a third analysis was gen
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erated involving only long volatility and not long gamma. The resulting position has lit
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tle time risk, but has risk if the stock drops in price. It is probably the best of the three.
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The strategist arrives at this conclusion through a logical process of analysis.
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ADVANCED MATHEMATICAL CONCEPTS
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The remainder of this chapter is a short adjunct to Chapter 28 on mathematical
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applications. It is quite technical. Those who desire to understand the basic concepts
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behind the risk measures and perhaps to utilize them in more advanced ways will be
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interested in what follows.
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CALCULATING THE "'GREEKS"
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It is known that the equation for delta is a direct byproduct of the Black-Scholes
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model calculation:
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~ = N(dl) |