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

  1. This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
    By continuing to use this site, you are consenting to our use of cookies.
    Dismiss Notice