Vega Multipliers Part 5 of 6
Part 5 of the Vega Multipliers™ Series (A unique concept developed by San Jose Options)
Learn one of the unique concepts developed and taught by San Jose Options Mentoring in this 36 minute class.
By understanding our "Vega Multiplier" concept, you'll be able to more accurately calculate the Vega position on any trade or on your whole option trading portfolio. This is a very important concept to comprehend and we highly recommend watching this Free class.
We have developed a system to get a more accurate reading on our Vega position and options trading portfolio. The fact is that Volatility (IV) changes at a different rate across the different expiration months, and it's very important to understand this concept if you want to have more control over your Vega position when you are working with options.
We also show how Calendar spreads are not as "Positive Vega" as they appear to be. This is a very interesting class on Vega, the Option Greek, and we recommend any option trader who takes this seriously to give this a good watch or two.
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So let’s look at this one. If I was to do this condor out 200 days, I’m looking at my Vega position of -164. Now, 99.9% of your option traders until now, you know, if they’re watching this video, they would tell you that your Vega position here is -164. And technically it is. So, I look at that and if somebody asks me, they say “what’s your Vega position right here?” I would have to say -164.74. That’s my Vega position. But if you want a realistic approach, if you want to know the true Vega on this, not the technical Vega but more of a reality, the reality of the situation; if you want to know that, you have to use your Vega Multiplier.
Now I’ve already created my chart. So I know that 206 days out is about 3.2. This is amazing. I take 164.74 divided by my Vega Multiplier which is 3.2 and I get 51.48. That’s amazing because the software is telling me that my Vega on this is -164 but in reality, it’s more of a Vega position of -51. Again, this whole concept should open your eyes. It should let you know that as you’re trading different months, again if you’re doing diagonals and calendars or doing condors in the front month and condors in the back month, is your trading different months, you have to bring in the Vega Multiplier and understand what your position Vega for that portfolio really is because the numbers giving in the software are not accurate. Again, they’re technically accurate but they’re not realistic numbers. So when it comes down to trading by the Greeks, you know, use this, test it out, look at the numbers yourself. Do the test like I just did. Go to October 2008, do the test and you’ll see what I’m saying is accurate and it’s something that can really start to change the way you trade and the way you think about your Vega position.
This is very interesting. You know right here we have a position that appears to be -164 and in reality it’s about a -51. It’s interesting and it’s something again, 99.99999% of your option traders do not know. I’ve never seen this taught anywhere else. I’ve never, just never heard this concept by anyone and I’ve studied with some very renowned option mentors out there and nobody’s ever talked about this.
Again, these are some things that you’ll learn in San Jose Options where you don’t learn somewhere else because in our course, we’re developing strategies, we’re developing concepts, we’re developing new ways to look at the Greeks. We’re really trading and we’re understanding things in a different light and we don’t just read a book and tell you what the book says. We’re really dissecting these things and I just think this is a great example of how we look at the Greeks in a more realistic approach and more hands-on way than you will learn somewhere else.
Let me show you something else, it’s really, really interesting because—Again, nearly 100% of the option traders will look at this calendar spread and tell me that this position Vega is 414, right? Go to your top mentors in the options industry and ask them that question and just about all of them are going to tell you “Yeah, this is positive Vega, 414.” Unfortunately, your option traders, they’re going to say the same thing. But then, you might do a position like this and perhaps volatility goes up one day and it might go up by one point and you don’t make $400 and you don’t know why or volatility drops and you make money and you don’t know why or it just stays flat and you don’t know why.