15
Oct
Dynamic Vega Options Trading

Managing Vega With Dynamic Vega Option Spreads

SJ Options specializes in second order Greeks, which are used to dynamically manage your portfolio of options.

Second Order Greeks

Wouldn’t it be nice if you could simple remove the effects of volatility from your option trading? This is one of the primary goals of all option traders who are educated. But how can we do it? If we construct an option spread with negative Vega, then we lose when IV rises. If we construct a spread with positive Vega, we lose when IV falls.

Many advanced option traders try to balance off the effects of the ever-changing IV by creating a portfolio with negative and positive Vega spreads. But does this really work? Now we have a situation where one trade loses while the other makes money, and they tend to cancel each other out. By trading this way, most traders end up with a hodgepodge portfolio that is hard to manage and doesn’t profit in the long run.

Now, by using second order Greeks properly, you can actually create a single spread that benefits from an IV drop as well as an increase in IV. This is the approach we take to solve this problem, but you have to understand how to use second order Greeks to do this.  Vanna, Veta and Vomma are used for this.

Instead of employing two strategies which cancel each other’s profits out, we can profit from any move in implied volatility. And the best characteristic of all is that if we face another “Flash Crash”, our dynamic Vega implementation will make a profit instead of causing great losses on our account. It’s a wonderful thing to be trading with insurance that is not eating into the profits of your trade.

Isn’t it time you learn to trade with higher order Greeks? Learn it here at San Jose Options, Inc.

recent posts

SJ Options Reviews by Jason

Hi Morris,I’m doing okay with HFM.  With real money, I closed a couple small positions for a total of +$10k.  I have an open position at +$2500.  So you can add me to the list at +$12.5k. Original email:

SJOptions Review by Jim

Hello Morris, I had 4 really small trades on last week.  I made $8,300.  My confidence is growing with these trades and I’m starting to put more capital to work.  I put 2 trades on Friday and will do the same this week on any pullback. I’m up to about 75 hours of backtesting now.  […]

icon
icon

tags

atm, bearish options strategies, Best Options Course, butterfly spread, calendar spread, call credit spreads, charm, credit spread, credit spread back test, credit spread options, credit spread strategy, credit spreads, day traders, defective imac, delta, full time options trading, gamma, greeks, high order greeks, higher order greeks, imac, imac problems, implied volatility, iron condor, iv rank, james cordier, karen the supertrader, learn options, learning options course, leverage, low risk options trading, mirage, option strategy, option trading, option trading checklist, option trading lifestyle, option trading mindset, option trading myths, option trading profits, optioncolors, optioncolors software, options analysis, options course, options learning course, options strategies, options trader, options trading, options trading course, options trading newsletter, options trading performance, options trading software, otm, pop, popular option trades, portfolio margin, portfolio margin trading, probabilities, probability of profit, profitable, review, San Jose Options, san jose options review, scalable, short strangles, sj options review, spread, spreads, strangle, strategies, tasty trade, tasty trade credit spread, tasty trade credit spreads, tasty trade iv rank, tasty trade ivr, tastytrade, tastytrade credit spreads, tastytrade strangles, tastytrade verticals, technical, testimonial, theta, time decay, trading volatility, training, unbalanced condor, vanna, vega, veta, vomma, weekly credit spreads