Short-dated for gamma, long-dated for vega
Asked at Optiver, Jane Street
You have two different views:
- View A: "This stock will move a lot over the next week."
- View B: "Option volatility across the whole curve is too cheap and will re-price higher."
Which tenor of at-the-money option best expresses each view, and why? Use the fact that gamma and vega scale oppositely with time.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.