Re:Statement of SEC Regarding Recent Market Volatility
by klodolph on Friday January 29, 2021 @11:42AM
(#25959230)
I don’t know how you could possibly reason about options without understanding delta, and gamma makes sense to me too since it’s just the derivative of delta as the underlying value changes.
Re:Statement of SEC Regarding Recent Market Volatility
by colejohnson66 on Friday January 29, 2021 @01:17PM
(#25960468)
As a math person, I’ve never heard “gamma” to mean the derivative of a change (a delta). For example, I was always taught that speed is v=delta-x/delta-t (distance over time). I’ve never heard gamma to mean that.
Re:Statement of SEC Regarding Recent Market Volatility
by klodolph on Friday January 29, 2021 @01:43PM
(#25960757)
Speaking as a math major, gamma means, like, a million different things. It’s just a letter. There are only 26 latin letters, 24 greek letters, the capitals, and then a few oddities like blackboard bold, fraktur, cursive, etc. You run out pretty quickly and end up reusing letters.
Just like pi means different things in different contexts. It might be a permutation, projection, a function which counts prime numbers, or it might be half the period of sin. I might write π(10) = 4, or π ≈ 3.14…, or for π in P, etc. I might say that π is the right inverse of ι, in other words π∘ι = id, and point to some digram with a bunch of arrows.
Delta is not just “a change” in this context. It is specifically the rate of change of an option’s value with respect to the value of the underlying security. Just like pi, delta and gamma mean different things in different contexts.
On one hand we have Occam's Razor: "the simplest solution is almost always the best." On the other we have "For every complex problem there is an answer that is clear, simple, and wrong." How does one know which to apply?