Saturday, January 5, 2013

greeks on the move - intuitively

When learning option valuations and greeks, people often develop quick reflexes about what-if's. Even a non-technical person can develop some of these intuitions. Because these are quick and often intuitive, this knowledge is often more practical and useful than the math details.

Some of these observations are practically important while others are obscure.

Q3: How would all indicators of an ATM instrument move when underlier rises/falls?
QQ: What if the instrument has very low/high volatility?
QQ: What if the instrument is far/close to expiry?

Q5: How would all indicators of a deep OTM (deep ITM is rare) instrument move when underlier moves towards/from strike?
QQ: What if the instrument has very low/high volatility?
QQ: What if the instrument is far/close to expiry?

Q7: How would all indicators of a deep-OTM/ATM instrument move when sigma_imp rises/falls?
QQ: What if the instrument has very low/high volatility?
QQ: What if the instrument is far/close to expiry?

Q9: How would all indicators of a deep-OTM/ATM instrument move when approaching maturity?
QQ: What if the instrument has very low/high volatility?

"Indicators" include all greeks and option valuation. The "instrument" can be a European/American call/put/straddle.

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New York (Time Square), NY, United States
http://www.linkedin.com/in/tanbin