Market Neutral, Not Delta Neutral
There are plenty of ways to put on option trades that have a neutral outlook: straddles, strangles, condors, etc. Whereas stock and futures traders are limited to whatever price action the market gives you, options let you take a view on implied volatility (vega), the passage of time (theta), and the rate of change of the rate of change of the option per unit move in the underlying (gamma). Okay, that last one isn’t so obvious, but the idea is…
Tuesday, August 12, 2008
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