

25 Sayings on Vol and Risk…Part 1 of 5
Jan 31, 2024
In this podcast, the speaker discusses the current state of market risk and shares a list of 25 sayings on vol and risk. They explore the importance of big moves in option trading, analyze S&P movements and their impact on investor psychology, discuss long volatility vs short volatility, and examine the impact of trades on market risk.
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Big Moves Matter Most
- Big moves have a disproportionate impact on option profitability.
- A single 4% move is equivalent to five 2% moves in its volatility impact.
Theta and Gamma
- Theta, the decay of option premium, is the cost of gamma, the option's sensitivity to price changes.
- This cost is often too high due to the volatility risk premium.
Hedge Proactively
- Hedge market risks when volatility is low and options are cheap.
- Don't wait until volatility spikes, as insurance becomes expensive and illiquid.