Comment on Application of Option Greeks

Vaib commented on 20 Aug 2014, 03:17 PM

Thanks Karthik. Sorry, I mean’t ATM straddle only. My point – let’s say we sell 7700 straddle for combined premium of 300 when spot was around 7700 only. BEP is 7400-8000. Now, spot comes to 7500, now what will you suggest – book 7700 call, sell 7300 call (since 7700 PE is going against with 200 points ITM)? This will become a short gut with 7700PE & 7300CE sold. I can hedge it like this but I fear of more one way down movement when the short gut range becomes more than combined premium eaten resulting into a loss. If you may guide on these kind of adjustments, would be helpful. Hope I make some sense 🙂

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