From Theory To Practice - May 3, 2021 - When Negative Theta Meets Positive Vega

published 1 week ago by tastytrade, Inc.

One of the core pillars of the tastytrade philosophy is selling out-of-the-money premium to improve our probability of success. But interestingly, in the situations where this out-of-the-money premium becomes in-the-money premium, undefined-risk positions don’t react the same way as defined-risk positions, in terms of Greek exposure. In fact, as we see today, our Greeks can completely flip over from positive to negative, or vice versa, which can leave us with something quite different from what it was when we started.

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