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Managing Greeks- Instrument Panel

Discussion in 'General Discussion' started by Avi, Mar 10, 2016.

  1. Avi

    Avi Member

    I would like to ask the community members their experience on managing the Greeks. The reason being that each "Expert" seem to articulate very specific guidelines and for the same strategy and portfolio greeks- the guidelines can be polar opposites and yet I find that each seem to make money in the end process most of the time!

    Case in point if you follow John Locke the Delta Theta Ratio, Theta vega ratio and Delta Vega ratio are vastly different compared to Tony Sizemore's who recommends a 1 to1 ratio for Theta Vega and 10% for delta theta ratios for the same strategy! The end result is that there may be many adjustments - more than I personally like to play with. On the other hand if one follows RTT there are no such guidelines except to have a very flat T +0 line and adjust the positions accordingly. So what is the optimal Greeks Management strategy if there are any that is universal- for RTT, STT, BWC, BBF or combinations

    All input would be appreciated.
     
  2. Kevin Lee

    Kevin Lee Well-Known Member

    There is no single best way to trade options. Neither is there a best way to manage the greeks. The important thing to understand is the WHY behind the WHAT. Different strategy attempts to achieve different goals. They can all be profitable, but the assumptions and the characteristics of the trades will likely be different. What you need to determine is which style you are more comfortable with and be really good at trading that particular style.

    Another thing I'd emphasize is don't be too hung up on specific greek rules. Options trading isn't an exact science. Modeling is at best a crude approximation of reality. Therefore, successful options trading can never be achieved by following strict rules like "when delta is X, do this". If it can be done (maybe I should say WHEN it can be done), algorithmic trading will take over. Nevertheless, that's a good start for beginners, but over time, traders must take the trade plan as a guideline to develop an intuitive ability to make judgement calls.
     
    Last edited: Mar 10, 2016
    Chuck, Avi, Scott Slivnik and 4 others like this.
  3. Scott Slivnik

    Scott Slivnik Well-Known Member

    The trade duration also plays a role. Tony Sizemore starts trades 20-30 DTE while John Locke starts most of his trades 50-60 DTE. The greeks on Tony Sizemore's trades will change much faster than a typical John Locke trade which is why Tony Sizemore's management style is more rigid and aggressive in my opinion. The road trip trade starts 70-80 DTE so the trade management tends to be very laid back.

    The trade duration and management comes down to the trader's personally and preferences.
     
    Chuck and Avi like this.
  4. Avi

    Avi Member

    Thanks Kevin.
     
  5. Avi

    Avi Member

    Thanks Scott.

    Concur that RTT is almost hands off the first 30 days and T +0 moves at a glacial space the first 3 weeks. WRT Tony Sizemore his approach using gears is a crafty one in the sense that just changing or modifying the gears seem to control the whole portfolio. In addition I like Ron's STT and though bearish biased with DTE in excess of 2 months. It is here that I like some forensics. JL likes to get his DTE to around 56 days. RTT is about 70 days. Does the greek score card even matter when you go beyond say 6 months of DTE other than in exigencies; as it has that much time to meander to the average trend thus limiting dial changes of greeks.
     

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