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I am modeling intraday and short term options on Futures.Think Monday, wednesday, friday contracts on these tickers: ES, NQ, CL, ZN, ZF, NG.

I am wondering about documentation for Intraday greek characteristics. I know these greeks like theta dont decay in a linear way, and gamma near expiry (<1hr until expiry) goes wild.

Does anyone have an understanding of how to model these correctly?

Also PnL... I was thinking of repricing the options throughout the day and taking the theo price vs the price purchased multiplied by the contract size *50(ES) for the PnL but had the idea that I might be able to get an estimation for delta and just calculate PnL of a price point based on delta and gamma. That should get me within 5-10% of where the actual contract would be in the case of a price shock. Is that crazy?

Lovinthecane
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  • There is nothing fancy about the modelling. Afaik the more sophisticated market participants will actually price via using fractional days. As for PnL explain using delta and gamma, you will start to struggle once your positions are really short term. Just think of ending up at the pin on expiry day. your gamma will basically be zero all of the time, however you may experience large PnL swings – ZRH Feb 18 '19 at 22:38
  • Well one Theta isnt a linear function and you might find a lot of theta drops off at the start of the day. However for futures that trade 23/5 its more likely its much more linear than stock options. 2.) gamma goes crazy at EOD of expiration day. So not sure what you mean. And i am pricing via using fractional days. which is a fraction like day/365.25 – Lovinthecane Feb 18 '19 at 23:16
  • This is not the answer to your question but maybe useful anyway: https://quant.stackexchange.com/questions/38937/gamma-delta-dynamics-in-the-black-scholes-model-and-its-relation-to-pnl-basic – Sanjay Feb 19 '19 at 01:42

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