What is the second derivative with respect to price of a put option?Call vs. Put OptionWhy we consider second...
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What is the second derivative with respect to price of a put option?
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What is the second derivative with respect to price of a put option?
Call vs. Put OptionWhy we consider second derivative w.rt price but only first derivative w.r.t time and volatility“Hedging” a put option, question on exerciseCalculate put price with Black-Scholes and one discrete dividendPut-on-call option confusionWhat time series and length should be used for a second-order derivative?How to calculate the vomma, Ultima and the a forth-order derivative of the option value to volatility?Use of second similar European Option as control variate to simulate a European optionDependency of an option price on time till expiryEuropean put price when stock price is 0 before maturity
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What is the reasoning/meaning behind the second derivative of a put option
options option-pricing european-options
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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add a comment |
$begingroup$
What is the reasoning/meaning behind the second derivative of a put option
options option-pricing european-options
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago
add a comment |
$begingroup$
What is the reasoning/meaning behind the second derivative of a put option
options option-pricing european-options
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
What is the reasoning/meaning behind the second derivative of a put option
options option-pricing european-options
options option-pricing european-options
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
edited 3 hours ago
Anna Black
asked 4 hours ago
Anna BlackAnna Black
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 4 hours ago
Anna BlackAnna Black
62
asked 4 hours ago
Anna BlackAnna Black
62
62
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Anna Black is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago
add a comment |
$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago
$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago
add a comment |
3 Answers
3
active
oldest
votes
$begingroup$
It is the rate at which the price of the option changes with respect to the change of the delta (the rate of change with respect to the underlying). As by design, options are non-linear in order to provide protection (limit loss) as well as provide some exposure to the underlying, their value will change its sensitivity to changes in the underlying. Due to curvature or convexity, so will this sensitivity to changes in the underlying. The second derivative is a measure of this change in sensitivity. It is a measure of realized volatility and is commonly referred to as gamma, among the option “greeks.”
As for a put option, if you are long the put option you are short delta and long gamma. If you are short the put, you are long delta and short gamma.
answered 1 hour ago
AlRacoonAlRacoon
1,51328
$endgroup$
add a comment |
$begingroup$
It's called Gamma one of the option Greeks.
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
$endgroup$
add a comment |
$begingroup$
One reason is that the second derivative returns the concavity.
Gamma measures the rate of change in the delta with respect to changes
in the underlying price. Gamma is the second derivative of the value
function with respect to the underlying price. Most long options have
positive gamma and most short options have negative gamma. Long
options have a positive relationship with gamma because as price
increases, Gamma increases as well, causing Delta to approach 1 from 0
(long call option) and 0 from -1 (long put option). The inverse is
true for short options.
Greeks (finance) in Wikipedia
Thank you for your question and welcome to quant.stackexchange.com!
answered 19 mins ago
EmmaEmma
28312
$endgroup$
add a comment |
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3 Answers
3
active
oldest
votes
3 Answers
3
active
oldest
votes
active
oldest
votes
active
oldest
votes
$begingroup$
It is the rate at which the price of the option changes with respect to the change of the delta (the rate of change with respect to the underlying). As by design, options are non-linear in order to provide protection (limit loss) as well as provide some exposure to the underlying, their value will change its sensitivity to changes in the underlying. Due to curvature or convexity, so will this sensitivity to changes in the underlying. The second derivative is a measure of this change in sensitivity. It is a measure of realized volatility and is commonly referred to as gamma, among the option “greeks.”
As for a put option, if you are long the put option you are short delta and long gamma. If you are short the put, you are long delta and short gamma.
answered 1 hour ago
AlRacoonAlRacoon
1,51328
$endgroup$
add a comment |
$begingroup$
It is the rate at which the price of the option changes with respect to the change of the delta (the rate of change with respect to the underlying). As by design, options are non-linear in order to provide protection (limit loss) as well as provide some exposure to the underlying, their value will change its sensitivity to changes in the underlying. Due to curvature or convexity, so will this sensitivity to changes in the underlying. The second derivative is a measure of this change in sensitivity. It is a measure of realized volatility and is commonly referred to as gamma, among the option “greeks.”
As for a put option, if you are long the put option you are short delta and long gamma. If you are short the put, you are long delta and short gamma.
answered 1 hour ago
AlRacoonAlRacoon
1,51328
$endgroup$
add a comment |
$begingroup$
It is the rate at which the price of the option changes with respect to the change of the delta (the rate of change with respect to the underlying). As by design, options are non-linear in order to provide protection (limit loss) as well as provide some exposure to the underlying, their value will change its sensitivity to changes in the underlying. Due to curvature or convexity, so will this sensitivity to changes in the underlying. The second derivative is a measure of this change in sensitivity. It is a measure of realized volatility and is commonly referred to as gamma, among the option “greeks.”
As for a put option, if you are long the put option you are short delta and long gamma. If you are short the put, you are long delta and short gamma.
answered 1 hour ago
AlRacoonAlRacoon
1,51328
$endgroup$
It is the rate at which the price of the option changes with respect to the change of the delta (the rate of change with respect to the underlying). As by design, options are non-linear in order to provide protection (limit loss) as well as provide some exposure to the underlying, their value will change its sensitivity to changes in the underlying. Due to curvature or convexity, so will this sensitivity to changes in the underlying. The second derivative is a measure of this change in sensitivity. It is a measure of realized volatility and is commonly referred to as gamma, among the option “greeks.”
As for a put option, if you are long the put option you are short delta and long gamma. If you are short the put, you are long delta and short gamma.
answered 1 hour ago
AlRacoonAlRacoon
1,51328
answered 1 hour ago
AlRacoonAlRacoon
1,51328
answered 1 hour ago
AlRacoonAlRacoon
1,51328
answered 1 hour ago
AlRacoonAlRacoon
1,51328
1,51328
add a comment |
add a comment |
$begingroup$
It's called Gamma one of the option Greeks.
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
$endgroup$
add a comment |
$begingroup$
It's called Gamma one of the option Greeks.
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
$endgroup$
add a comment |
$begingroup$
It's called Gamma one of the option Greeks.
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
$endgroup$
It's called Gamma one of the option Greeks.
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
edited 16 mins ago
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
answered 2 hours ago
Bob Jansen♦Bob Jansen
3,62252246
3,62252246
add a comment |
add a comment |
$begingroup$
One reason is that the second derivative returns the concavity.
Gamma measures the rate of change in the delta with respect to changes
in the underlying price. Gamma is the second derivative of the value
function with respect to the underlying price. Most long options have
positive gamma and most short options have negative gamma. Long
options have a positive relationship with gamma because as price
increases, Gamma increases as well, causing Delta to approach 1 from 0
(long call option) and 0 from -1 (long put option). The inverse is
true for short options.
Greeks (finance) in Wikipedia
Thank you for your question and welcome to quant.stackexchange.com!
answered 19 mins ago
EmmaEmma
28312
$endgroup$
add a comment |
$begingroup$
One reason is that the second derivative returns the concavity.
Gamma measures the rate of change in the delta with respect to changes
in the underlying price. Gamma is the second derivative of the value
function with respect to the underlying price. Most long options have
positive gamma and most short options have negative gamma. Long
options have a positive relationship with gamma because as price
increases, Gamma increases as well, causing Delta to approach 1 from 0
(long call option) and 0 from -1 (long put option). The inverse is
true for short options.
Greeks (finance) in Wikipedia
Thank you for your question and welcome to quant.stackexchange.com!
answered 19 mins ago
EmmaEmma
28312
$endgroup$
add a comment |
$begingroup$
One reason is that the second derivative returns the concavity.
Gamma measures the rate of change in the delta with respect to changes
in the underlying price. Gamma is the second derivative of the value
function with respect to the underlying price. Most long options have
positive gamma and most short options have negative gamma. Long
options have a positive relationship with gamma because as price
increases, Gamma increases as well, causing Delta to approach 1 from 0
(long call option) and 0 from -1 (long put option). The inverse is
true for short options.
Greeks (finance) in Wikipedia
Thank you for your question and welcome to quant.stackexchange.com!
answered 19 mins ago
EmmaEmma
28312
$endgroup$
One reason is that the second derivative returns the concavity.
Gamma measures the rate of change in the delta with respect to changes
in the underlying price. Gamma is the second derivative of the value
function with respect to the underlying price. Most long options have
positive gamma and most short options have negative gamma. Long
options have a positive relationship with gamma because as price
increases, Gamma increases as well, causing Delta to approach 1 from 0
(long call option) and 0 from -1 (long put option). The inverse is
true for short options.
Greeks (finance) in Wikipedia
Thank you for your question and welcome to quant.stackexchange.com!
answered 19 mins ago
EmmaEmma
28312
answered 19 mins ago
EmmaEmma
28312
answered 19 mins ago
EmmaEmma
28312
answered 19 mins ago
EmmaEmma
28312
28312
add a comment |
add a comment |
Anna Black is a new contributor. Be nice, and check out our Code of Conduct.
Anna Black is a new contributor. Be nice, and check out our Code of Conduct.
Anna Black is a new contributor. Be nice, and check out our Code of Conduct.
Anna Black is a new contributor. Be nice, and check out our Code of Conduct.
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$begingroup$
Derivative with respect to what, price?
$endgroup$
– Bob Jansen♦
4 hours ago
$begingroup$
yes, with respect to price
$endgroup$
– Anna Black
3 hours ago