How Vega Can Deceive You: Part I
As you probably know, iron condors are short Vega – which represents your position’s sensitivity to shifts in implied volatility. In a relatively low volatility environment, this can be troublesome when suddenly volatility spikes and your iron condors suffer as a result. So let’s say you add some Vega to your portfolio by buying some 4 month calendars (ex: June/October) to hedge against an expected volatility pop. You now have a net Vega position of 100, your Delta is flat…
Wednesday, May 7, 2008
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