Question on gamma

mdrand · July 16th, 2009, 7:50 am

Hi,A basic question on gamma. If you are long a call, you are long gamma . When a trader says that 'gamma is bid for most of the day', what does he mean ?

daveangel · July 16th, 2009, 9:00 am

this usually refers to a preference for shorter-dated options (have higher gamma) than longer dated options (more vega).

mdrand · July 16th, 2009, 9:33 am

Hi,It makes sense. Is it usually the case that when gamma is bid, medium vols are offered ? Additionally, I know that when a trader says that the skew is offered, he means that OTM downside vols are offered. I usually come across comments such as 'convexity is offered and gamma was bid'. I understand the gamma bit thanks to your explanation. But what does the convexity refers to ?Thanks

mdrand · July 16th, 2009, 9:33 am

Hi,It makes sense. Is it usually the case that when gamma is bid, medium vols are offered ? Additionally, I know that when a trader says that the skew is offered, he means that OTM downside vols are offered. I usually come across comments such as 'convexity is offered and gamma was bid'. I understand the gamma bit thanks to your explanation. But what does the convexity refers to ?Thanks

mdrand · July 17th, 2009, 12:35 pm

Hi,Is there anybody who could help ?

Randomness · July 19th, 2009, 9:55 am

are you on an fx options desk ? if you are think of the risks of a DNT and you willfind your answer in it..