Setup and roll written already in first pic bottom.
Simple math 2x0.75 delta - 0.5delta = approx 1delta which is future delta. Payoff diagram posting below.
Simple math 2x0.75 delta - 0.5delta = approx 1delta which is future delta. Payoff diagram posting below.
No effect of vega. Almost fraction.
https://twitter.com/AakashN50/status/1329820646344310786?s=19
For adjustment:
In profit side: Once in Profit u can lock profit of one long leg and position will convert risk free projection or sell otm call like covered call when view changing.
In loss side: if view unchanged roll down position or sell additional atm so its become spread.
In profit side: Once in Profit u can lock profit of one long leg and position will convert risk free projection or sell otm call like covered call when view changing.
In loss side: if view unchanged roll down position or sell additional atm so its become spread.
Rest go with spread adjustment.
Otherwise convert position with additional itm Option sell and its look like reverse butterfly (1 itm 1 otm Option sell and 2 near spot Option buy).
Otherwise convert position with additional itm Option sell and its look like reverse butterfly (1 itm 1 otm Option sell and 2 near spot Option buy).
Z E B Ra = Zero Extrinsic Back Ratio.
So only intrinsic value present so no statically no theta or vega issue if position stay the same place.
Only one issue is if price move downside and stay for some day then theta issue come due to balance of extrinsic value mismatch.
So only intrinsic value present so no statically no theta or vega issue if position stay the same place.
Only one issue is if price move downside and stay for some day then theta issue come due to balance of extrinsic value mismatch.
2 use of it
Replacement of future without much overnight big gap risk.
Hedging purpose which offset total loss after breakeven & better than collar.
Prefer t+0 line in second tweet payoff, dont confused with expiry graph or excel expiry value. Loss also like future at one level.
Replacement of future without much overnight big gap risk.
Hedging purpose which offset total loss after breakeven & better than collar.
Prefer t+0 line in second tweet payoff, dont confused with expiry graph or excel expiry value. Loss also like future at one level.
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