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Greek discrepancies between RUT and IWM

Discussion in 'Options' started by Mark Mosley, Dec 30, 2015.

  1. Mark Mosley

    Mark Mosley Member

    I am playing with the idea of trading some small butterflies in the IWM as opposed to the RUT. I cant seem to get the greeks to fall in line using TOS with the volatility smile setting, comparing a one lot RUT butterfly to a 10 lot IWM butterfly. I realise this is not an exact apples to apples comparison, but to illustrate, I spot checked a 1x RUT Butterfly to a 10x IWM butterfly and these were the results. RUT 1190/1140/1090 for Feb gives me a delta of 8.6 and theta of 9.8. Compare this to an IWM 10 lot butterfly for Feb, 119/114/109 and I get a delta of 68, and a theta of 10.3. The delta/ theta ratios are not even close in this comparison. What am I missing here?
     
  2. Rick

    Rick Active Member

    Mark: with TOS look in the "Positions and Simulated Trades" section of the Analyze tab, and compare using the portfolio beta weighting set to RUT
     
  3. Rick

    Rick Active Member

    Mark: here is a screen shot and you can see the delta's are -8.14 vs -6.18. Also there is a bug in the beta weighting that causes a display of "not traded" for the IWM. I reported this and spent allot of time with TOS on this a few weeks ago.

    Capt. Hobbs wrote about how to adjust the IWM strikes to get a closer approximation to the RUT but I can't recall which thread it was in.
     

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  4. Mark Mosley

    Mark Mosley Member

    Rick- Thank you, I have been scratching my head over that one for weeks! It seems to work about as well to move the delta decimal one place to the left for IWM trades as a rule of thumb.
     
  5. status1

    status1 Well-Known Member

  6. status1

    status1 Well-Known Member

    Sorry I meant to post the previous reply to the
    Best Backtesting Tool thread I was reading a few different posts at the same time
     
  7. status1

    status1 Well-Known Member

    I had the same idea but I am just starting out testing these strategies
    As far as the rut and the iwm they seem to be close in a a 1 to 10 relationship I am just not sure if it would work the same when you add a calendar or a call to it

    As far as the beta weighting it is normal to show "not traded" on TOS at least that is nothing new to me
    It shows that if you are looking across from one to another so for example if you are looking at the iwm your rut position would say "not traded" and vice versa I guess it can only compare to one Also if you have other simulated trades they are also shown as "not traded" or maybe that is done so you would know which one is the active symbol you are looking at which can be confusing if you have multiple symbols open
     
  8. Capt Hobbes

    Capt Hobbes Well-Known Member

    A substitute for RUT 1090/1140/1190 is actually IWM 108/113/118. Today's RUT spot is 1110.45, IWM is 110.25, which is about a point lower than 1/10 of RUT. If you look at individual options, you'll see that the greeks of, say RUT 1090 are better matched by IWM 108 than IWM 109.
     
    Last edited: Jan 6, 2016

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