ttselva 1 Report post Posted July 17, 2012 I have a question on theta and vega and I am trying to understand how these two may work together. I am looking at RUT August 755/765 puts. On the IB, for the 765 puts, theta is -0.28 and vega is 0.72. So, if I sell 765 puts, the value increases by $28 the next day assuming everything is same. But if the IV goes down by 1% the next day, will the value increase by $72 (for vega) + 28 for theta for a total gain of $100 for a day (assuming everything else is the same). I would apprecaite your thoughts. Thanks. 1 Emptyeternity reacted to this Share this post Link to post Share on other sites
Marco 221 Report post Posted July 17, 2012 (edited) you are spot on, when you are short options you hope the underlying doesn't move much so you receive the theta without losing on the delta and/or gamma and you hope for IV to collapse. Edited July 17, 2012 by Marco 1 Emptyeternity reacted to this Share this post Link to post Share on other sites
