1. Long Gamma, Short Vega
Q: How do you create a long gamma, short vega options trading strategy?
A: Buy short-dated options that are slightly out-of-the-money. Example: Weekly ATM straddles. These offer high gamma and limited vega exposure.

2. Gamma Curve Shape
Q: What is the shape of the gamma curve for a vanilla option?
A: Gamma is bell-shaped and peaks when the option is at-the-money, declining as it becomes deep ITM or OTM.

3. Long Gamma Intraday Moves
Q: What happens to your position if you’re long gamma and the market moves a lot intraday?
A: You benefit. Delta exposure shifts favorably and you can rebalance for profits. Ideal in volatile conditions.

4. Vega Convexity
Q: Explain vega convexity.
A: Vega convexity measures how vega changes with implied volatility. Long-dated options have greater convexity.

5. Realized vs. Implied Volatility
Q: What’s the difference between realized and implied volatility?
A: Realized is historical. Implied is forward-looking. The difference drives P&L in volatility strategies.

6. Gamma Scalping
Q: What is a gamma scalp?
A: A strategy where you’re long gamma and rebalance delta frequently to monetize realized volatility.

7. Time Decay in Long Gamma
Q: How does the passage of time affect a long gamma position?
A: It causes theta decay. Gamma and theta are inversely related.

8. Long Straddle Greeks
Q: What are the Greeks of a long straddle?
A: Delta: Neutral, Gamma: Positive, Vega: Positive, Theta: Negative.

9. Delta Hedging a Long Option
Q: How do you delta hedge a long option?
A: Short shares equal to the option’s delta. Rebalance as delta shifts.

10. Selling Options in Low Vol
Q: What’s the risk in selling options in a low-volatility regime?
A: Exposure to a volatility spike. Gamma and vega risks are heightened.

Greeks & Sensitivity

11. Charm
Q: What is charm and why does it matter?
A: Rate of change of delta with respect to time. Affects delta exposure without price movement.

12. Vanna
Q: What is vanna?
A: Sensitivity of delta to changes in implied volatility.

13. Volga (Vomma)
Q: What is volga?
A: Second derivative of option value with respect to vol. Measures vega change.

14. Gamma Exposure (GEX) Effect
Q: How does gamma exposure affect market stability?
A: Long gamma stabilizes. Short gamma amplifies volatility.

15. Gamma-Theta Relationship
Q: What’s the relationship between gamma and theta?
A: Inversely related. Higher gamma means more negative theta.

Strategy & Positioning

16. View on Rising Vol
Q: How would you express a view that volatility will rise?
A: Buy a straddle, strangle, or long calendar.

17. Direction + Vol Crush
Q: How do you structure a trade to benefit from a directional move and vol crush?
A: Buy a vertical spread.

18. Ratio Spread Favorability
Q: When is a ratio spread favorable?
A: Low vol regimes with moderate directional bias.

19. Risk Reversal Use
Q: What is a risk reversal and when do you use it?
A: Buy call/sell put or vice versa to express direction + skew views.

20. Strangles vs Straddles
Q: Why sell strangles instead of straddles?
A: Lower gamma sensitivity. More breathing room.

Volatility & Skew

21. Skew in Equities
Q: Why does skew exist in equity options?
A: Demand for downside puts inflates OTM IV — creating negative skew.

22. Realized vs Implied Skew
Q: What is realized skew vs. implied skew?
A: Realized = historic return distribution. Implied = market pricing of tail risk.

23. Skew in Sell-offs
Q: How does skew change during sell-offs?
A: Put skew steepens. OTM put IVs rise.

24. Smile vs. Smirk
Q: What’s a vol smile vs. vol smirk?
A: Smile = symmetrical. Smirk = negative skew.

25. Earnings & IV Term
Q: How does earnings affect IV term structure?
A: Front month IV spikes, collapses post-event.

Risk & Hedging

26. Hedging a Short Straddle
Q: How would you hedge a short straddle?
A: Dynamic delta hedge. Long-dated options for vega hedge.

27. Convexity Risk
Q: What is convexity risk in an options book?
A: Non-linear P&L from gamma, vanna. Not captured by linear Greeks.

28. Long Vega Risk
Q: What’s the biggest risk to a long vega position?
A: Vol collapse or vol regime shift.

29. Managing Short Gamma Near Expiry
Q: How would you manage a short gamma position into expiry?
A: Hedge more frequently. Cut size. Be cautious.

30. Sticky Delta vs Sticky Strike
Q: Explain sticky delta vs sticky strike.
A: Sticky delta = vol tied to moneyness. Sticky strike = vol tied to fixed strike.

Execution & Market Behavior

31. IV Rise Without Price Move
Q: What causes implied volatility to rise without a price move?
A: Anticipated catalysts, order flow, uncertainty.

32. Long Vol Book Losing Money
Q: Why might a long vol book lose money even if the market is volatile?
A: Realized vol doesn’t exceed implied. Theta drag.

33. Dealer Behavior Near OPEX
Q: How do dealers affect the market near large expirations?
A: Gamma hedging may pin prices near key strikes.

34. Forward Vol vs Implied Vol
Q: What’s the difference between forward vol and implied vol?
A: Forward = between expiries. Implied = for a single expiry.

35. Trading Vol Events
Q: How would you trade a volatility event (e.g., CPI or FOMC)?
A: Pre-event: Buy gamma/vega if cheap. Post-event: Fade vol if implied overshoots.