求助 13.11 2001-q113

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113.    An option portfolio exhibits high unfavorable sensitivity to increases in implied
        volatility and while experiencing significant daily losses with the passage of time.
        Which strategy would the trader most likely employ to hedge his portfolio?

        a.     Sell short dated options and buy long dated options.

        b.     Buy short dated options and sell long dated options.

        c.     Sell short dated options and sell long dated options.

        d.     Buy short dated options and buy long dated options.

我看了下答案不是太明白，有谁能帮忙解释一下吗？谢谢

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关键词：Sensitivity significant Volatility Portfolio Increases 求助

Explaination of the question:
The trader's option portfolio is short vega (that's why it says highly unfavorable sensitive to increases implied volatility, and only long-dated option has very high vega) and short theta (that is, the trader long a lot of short-dated options which leads to significant daily losses). So to reduce the losses, the trader needs to buy long-dated options to hedge vega and sell short dated option to hedge theta.

I recommend you to plot  the graph of call option vega vs. time to expiration and call option theta vs. time to expiration and then you will understand what I just said.

The tricky part of this question is "high unfavorable sensitivity to increases in implied volatility" This means trader loses money when the implied volatility increases.

Thanks! I didn't know that long theta means your position makes money as time passes. short theta=long position

应该选B吧。不确定

m.incredible 发表于 2009-11-7 13:35
应该选B吧。不确定

答案是A.

A.
Short dated option, big - Theta,  small + Vega
Long dated option, small - Theta, big + Vega

SELL short dated option + BUY long dated option = + Theta, + Vega
(short dated option dominates Theta whereas long dated option dominates Vega)

Existing portfolio = -Vega (loss on vol increase), -Theta (loss on time passing)

now they can cancel out the risk exposures.

虽说楼上的解释了这么多，但是我觉得还是有点问题
因为theta is not a risk factor
但我明白你的思路