## Understanding gamma – part 2

Gamma is defined as the rate of change of delta with respect to a given change in the underlying price. In the last post we looked at delta hedging a short call position and looked…

Gamma is defined as the rate of change of delta with respect to a given change in the underlying price. In the last post we looked at delta hedging a short call position and looked…

Published by Fmarketuser

Introduction Over the last few posts we have spent a fair amount of time looking at delta as a measure of directional price risk. Arguably, the more difficult concept to grasp is that of gamma. …

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In the previous post we looked at the payoff that combined a short call position with a delta hedge such that the trader was immune from small changes in the underlying price. This is shown…

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In the previous post we had sold 100 ATM call options on Tesla and hedged the delta exposure by purchasing 56 shares. Using a simple example, we illustrated that the position was immune from small…

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Let’s start with a quick recap of a couple of key concepts. Suppose you have bought a 3 month ATM option on Tesla struck at a price of $1,000. With an implied volatility of 60%…

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Delta Does anyone remember graph paper? I recall as a 14 year old sitting in a maths class being asked to draw tangents to curves. I never really got the point until I started looking…

Published by SwDev

Intrinsic and time value Over the next few posts we will look at some aspects of option valuation and option Greeks. This first post revisits a couple of valuation principles that are relevant to the…

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Why inflation breakevens may not reflect ‘true’ of inflation – part 3 02 May 2023 Inflation-linked bonds are regarded as being relatively illiquid. But what does this mean? One nice explanation comes from Barclays Bank “The reason…

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This second post will consider the issue of par floors and how they impact real yields. Some sovereign linker markets issue bonds that protect the investor against deflation. Examples include the USA but not the…

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This is the first of a couple of blogs that look at why inflation breakevens may not be a measure of ‘true’ inflation. One of the most useful relationships in finance is the Fisher equation. …

Published by SwDev