Options are derivatives. They derive their value from how the underlying actually moves as well as the market’s perception of how much they will move. So there’s a realized and implied component to the value of an option. When people start using options they are usually attracted to them as an inherently levered way to … Continue reading Why Option Traders Focus on Vega →| Party at the Moontower
In this post, we will learn what it means for a position to be convex with respect to volatility. In preparation for this post, you may want a refresher. Vega is the sensitivity of a P/L to changes in volatility. This is the exposure volatility traders are taking active views on. It requires tremendous attention … Continue reading Finding Vol Convexity →| Party at the Moontower