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cdcaveman

Registered: Aug 2011
Posts: 3514

09-01-12 12:19 AM

just curiuos.. i was reading some stuff in the latest Stocks and Commodities mag and i've been thinking about it lately as well.. being as it that certain instruments "futures" have more leverage... you can sell higher number of contracts relative to the actual amount needed out of your account to hedge.. if you follow... page 64 in sept issue.. instead of using the actual underlying in which you only get .50 margin on.. you could say buy 100 calls on the s&p with a delta of .50 you could then short 50 futures contracts... so say thats long vol.. but you could short vol as well in the same respect...
so my question is...

Does anyone have experience with delta hedging with futures? i wanna figure out a way to dynamically hedge options with futures such that i can better use leverage to sell premium.. that or gamma scalp..

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cdcaveman

Registered: Aug 2011
Posts: 3514

09-01-12 03:59 AM

there has to be someone that does this??????

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cdcaveman

Registered: Aug 2011
Posts: 3514

09-01-12 04:24 AM

Delta Hedging using Futures
In practice, hedging is often carried out using a position in futures rather than one in the underlying cash asset. Mathematically, under the no-arbitrage argument, it can be shown that e(rÂ¡d)t futures contracts have the same sensitivity to stock price movements as one cash
contract.

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quatron

Registered: Jul 2011
Posts: 63

09-01-12 12:55 PM

ATM Calls delta hedged with futures are synthetic straddles. So you might consider trading straddles instead.

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2rosy

Registered: May 2012
Posts: 336

09-01-12 01:12 PM

Quote from cdcaveman:

Does anyone have experience with delta hedging with futures? i wanna figure out a way to dynamically hedge options with futures such that i can better use leverage to sell premium.. that or gamma scalp..

its pretty hard to scalp gamma when you're short premium

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sle

Registered: Apr 2003
Posts: 1609

09-01-12 01:15 PM

Quote from 2rosy:

its pretty hard to scalp gamma when you're short premium

I think a better way of putting it is "it's pretty easy to get scalped by gamma when you are short premium"

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