gamma adjustment across different maturities

[mensatrader]

Hi, is it true that gamma needs to be adjusted for options with different maturities? For example, if the volatility of a 6-month option A has twice as high as a 3 month option B's volatility, then the Gamma of A should be adjusted by mutiplying 2 with the black-scholes calulated Gamma of A? why?

many thanks

 

[Shakone]

Hi, is it true that gamma needs to be adjusted for options with different maturities? For example, if the volatility of a 6-month option A has twice as high as a 3 month option B's volatility, then the Gamma of A should be adjusted by mutiplying 2 with the black-scholes calulated Gamma of A? why?

many thanks

Not sure I've understood the question, but the formula for the gamma depends on time to maturity and the vol (among other things). Adjusting the vol for different times is not a linear adjustment, you need the square root with respect to time.

 

[mensatrader]

Not sure I've understood the question, but the formula for the gamma depends on time to maturity and the vol (among other things). Adjusting the vol for different times is not a linear adjustment, you need the square root with respect to time.

thanks mate! it's not adjusting vol, but adjusting gamma based on different vol of different maturities

 

[Blister]

Haven't you answered your own question? It is a certainty the gamma will be different among different expires. But I would model the differences and see if it is worth the bother of netting out multiple gammas.

Hi, is it true that gamma needs to be adjusted for options with different maturities? For example, if the volatility of a 6-month option A has twice as high as a 3 month option B's volatility, then the Gamma of A should be adjusted by mutiplying 2 with the black-scholes calulated Gamma of A? why?

many thanks

 

[mensatrader]

Haven't you answered your own question? It is a certainty the gamma will be different among different expires. But I would model the differences and see if it is worth the bother of netting out multiple gammas.

thanks mate. i think that's where shadow gamma comes from.