I have been saying things like this ( Short vega, etc ) for so long, I should realize that on the surface it does not make too much sense.

What I am talking about is how your current position reacts to one of the greeks. Let’s take short vega as an example, also called negative vega and short volatility they mean the same thing. Your position makes money if if volatility decreases.

[EDITED - Thanks Michael . Man, I need to find a proofreading 101 class]

Long Theta is a little bit stranger. Long theta means your position makes money as time passes. Time usually moves forward, so we pretty much know long theta will help our position. How much it help depends on other factors.

SO here is an example. The Mar 08 250 BIDU put closed at 16.90 ( 2/15/08 ) with BIDU closing at $259.10. The position is short theta in that it loses money over time. The amount it loses increases every day, with the rate increasing the most in the last 30 days.

Using a option calculator, and advancing the date to Monday ( 2/18/08 ) , we have a price of $16.03. A loss of about ~$29 a day. Now, this is if implied volatility and price of the stock do not change. Both of these are unlikely, since the implied volatility on Fridays gets messed around.

So the BIDU 250 PUT is short theta in that the option is losing $29 a day.

Personally, I like long theta trades. IF / WHEN you are wrong in your equity selection, you have time to adjust your trade without have to pay the “vig” everyday.

~ squid

I like writing again. Maybe I will start doing book reviews or something.