Quantcast
  1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Delta-Theta ratio

Discussion in 'General Discussion' started by NoMoWork, Dec 20, 2016.

  1. NoMoWork

    NoMoWork Member

    In last Saturday's Q&A Dan mentioned the delta-theta ratio related to a new trade. What ratio is acceptable, and is this ratio monitored throughout the trade cycle?
     
  2. DGH

    DGH Administrator

    The beginning theta to delta ratio should be at least 2:1 (preferably 3:1), and it should increase over time. This ratio reflects the value of theta divided by the absolute value of position delta. Yes, I always monitor this ratio as well as all the greeks. However, I focus primarily on the overall appearance of the risk graph, the shape and degree of compression of the family of curves (if any), and the real time P/L.
     

Share This Page