Post by Admin on Jan 12, 2014 22:12:03 GMT
So this will be a weekly feature, and the first correct reply (some judgement involved) will be sent a 20% discount code for the Interview Guide (found at salesandtradingcareers.com).
Question 1: You are long a 1Y at the money straddle, delta neutral, the current market is 18% - 22% in terms of implied volatility. You bought this straddled at an 18% vol. You decide to mark the position on an 18% vol instead of the mid of 20% because you pay less decay and have more gamma.
Why wouldn't you do this with all vol you buy? as you end up paying less decay and receive more gamma?
Note the answer has two parts, one more obvious one and another a bit less obvious.
Question 1: You are long a 1Y at the money straddle, delta neutral, the current market is 18% - 22% in terms of implied volatility. You bought this straddled at an 18% vol. You decide to mark the position on an 18% vol instead of the mid of 20% because you pay less decay and have more gamma.
Why wouldn't you do this with all vol you buy? as you end up paying less decay and receive more gamma?
Note the answer has two parts, one more obvious one and another a bit less obvious.
