2

So, I am reading Natenberg and it says that during expiration(close to expiration), the deep in the money options will have Gamma and Theta in the same direction. This was a bit counter intuitive to me as to why that would be?

Sagar Chand
  • 121
  • 3
  • 1
    When you are long a deep in the money European option, in a world of positive interest rates, the option has little sensitivity to S and is essentially a discount instrument. It increases (positive theta) as the expiration date approaches just like a Treasury Bill appreciates, due to the Time Value of Money. This is an unusual case. OTOH the Gamma of long option positiion is always positive. – nbbo2 Jul 06 '23 at 12:59
  • 1
    See here, last picture – AKdemy Jul 06 '23 at 13:13

0 Answers0