Comment on Greek Interactions

Srikrishna Rowthu commented on 02 Mar 2019, 01:25 PM

Hi Karthik,

1) In the earlier chapter, while discussing “Volatility vs Premium” , we discussed that when volatility increases , premiums tend to increase.
2) In this chapter, when you plotted a graph for “Delta vs Implied Volatility”, we took 175 as ATM, and if you look around 160 CE strike, at the red and blue line, we could find that red line delta is less compared to blue line’s delta.
So, as we know, for the same strike, if the delta is more, the premium is more, the premium should be more for blue line(when volatility is less) (Note: I am specifying for around 160 CE strike and not for ITM strikes).

Clearly both the above points contradicts one another.
So, my question here is, when all these factors impact the premium at a time, taking a particular strike and when it comes to “Volatility impact on the premium” vs “Delta impact on premium when volatility differs” , which one impacts more and how does this impact differ?


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