can anybody tell me how we can decompose option P/L?? (Tsy Fut Option) I want to reconsileactual pnl by using greeks.Assumption: delta hedge at initiation of trade(when we sell call tsy fut option, buy delta amount fut)and we held position from t1 to t2Actual PnL of this position isQty*((Opt(t2)-Opt(t1)) + delta_@t=t1 * future price change from t1 to t2)So when I decompose it using greeks, I used(-0.5*Gamma_@t=t1*(realized_vol -implied_vol@t=t1) + Vega_@t=t1*Implied_vol_change from t1 to t2)*Qtywhere realized_vol = abs(ln(P(t1)/P(t2))/sqrt(t2-t1)But my calculation doesn't match actual pnl... can someone help??Thx,

Not sure i understand your notation, but shouldnt you at least square the vols in the gamma part of your equationIn principle, you would need 1) cost of gamma 2) theta effect 3) vega effectfor (1) i would use .5*gamma*(chg in underlying)^2for (2) theta scaled to option positionfor (3) vega same as you didfeel free to correct me, would be interest in how this is really done myself

Gmike Thx.Yes, I missed vol^2...for the expression that I putSo your idea is to decompose into gamma and theta instead of aggregate and caluculate effect by usingrealized vol^2 - implied vol^2 multiplied by gamma, correct?But still seems to be missing.. tried for different maturity, strike and for some cases it looks figure is close but foranother cases it doesn't work....PnL should be approximately, I think, reconciled just by using greeks since we just hedged once at initiation of this position... thx.