Option P&L attribution is an important component of portfolio and risk management. We have previously discussed related topics, including how option P&L is path-dependent. Reference examines P&L attribution and, specifically, the sources of P&L in a risk-reversal position, a structure commonly used to express a view on volatility skew. …

The P&L attribution of an option portfolio is highly important, as it aids in portfolio and risk management. Most often, the daily P&L of an option is broken down into four components: theta, delta, gamma, and vega. This decomposition works well in most cases, especially when the market moves orderly, …

It is well known that equity indices tend to exhibit a negative correlation with their volatility. There is some research on this relationship, often linking it to the leverage effect. Recently, we observed that the equity market has been behaving unusually, with the spot-volatility correlation turning positive. It is therefore …

Options volume has increased dramatically in recent years, particularly in very short-dated options (0DTE and 1DTE). One theory suggests that information extracted from option trading activity can predict future stock returns. Along these lines, Reference examines whether short-dated option prices lead stock prices. It analyzes 2025 data covering 30 …

The Black–Scholes–Merton (BSM) model is one of the most celebrated option pricing models and remains widely used by academics and practitioners alike. At its core, it states that the value of an option equals the cost of replicating its payoff through continuous dynamic hedging. In practice, however, continuous rebalancing is …

Decomposing option P&L into individual Greek contributions is a useful practice. The decomposition is typically derived from a Taylor expansion and serves both risk-management and research purposes. For example, some studies use gamma P&L as a measure of convexity and as a tool for analyzing the variance risk premium. Reference …

Option pricing is typically conducted under the risk-neutral (Q) measure, whereas the drift of the underlying asset in the real world is specified by the physical (P) measure. The interaction between these two measures is subtle and has been the subject of several studies, including research on delta hedging and …

Managing an option book is not trivial. There is considerable research on hedging errors, optimal hedging frequency, and the choice of volatility inputs used in hedging algorithms. Reference continues this line of research by examining the effectiveness of hedging strategies under five different volatility measures: Flat ATM implied volatility …

Options pinning, the tendency of underlying prices to gravitate toward strikes with concentrated open interest near expiration, is well documented. However, given the rapidly changing options landscape, it is worth reassessing whether this effect still holds. Reference examines options pinning using data from 2016 to 2025, a period marked …

Options trading volume has been increasing rapidly, potentially altering market dynamics. Reference examines whether aggregate gamma exposure (GEX) in the S&P500 index options market contains predictive information about future equity returns and whether it can enhance short-term forecasting models. To do so, the authors construct an Autoregressive Distributed Lag …