He must have an RSS feed where he's notified when I post a hedge in futures and then he sends one of his PM queefs. He should have waited until it went against me. I've never witnessed a bigger tool. Oops, I am up 2.50 on my futures.
I wouldn't average in that scenario as it's nearly at neutrality. I'd go with something slightly exceeding delta. The goal is to avoid flipping and carrying a hedge that has now become the primary risk. The half-hedge would force you to reduce at the strike or close the position down. Honestly, I'd probably be out of the fly if it was initiated OTM with shares at 48. Yeah, the vegas go "thin" on convexity (platy to lepto) which is one reason it's important to watch your fly-deltas closely as you approach exp.
I think I get it. The decision to half hedge vs. close the position and book profits depends on how close it is to short strike and how close to expiration? So if stock starts meandering up from 48 to 54 at about 7 DTE, you'd book pnl and take it off due to risk reward... BUT what if it drifts up too early (15-20 days to exp). Your fly pnl has not "blossomed" yet, slightly up maybe. Is that when you do half hedge to distribute the pnl across the curve from 54 downwards albeit creating a bigger risk above 55? At that point I guess you are making a distro call that since xyz has gone form 48-53, next moves prob going to be at or lower hence the half hedge?
We are indeed witnessing entertainment here these days. Between your jackwagon stalker and the apparently futile attempted education of PM over in the Options forum, we've clearly devolved. I think it's great that you put yourself "out there" and subject yourself to these invasions and insults. I wouldn't do it. I don't possess your skill set or patience for such digressions. We're all the better for your tolerance as we learn from your sharing. And for that, we thank you.
No worries, just needed to read carefully and visualise exactly what you advocate here. BTW, this discussion on OTM butterflies has been great, most helpful.
I'd like to echo ktm's sentiment re: atticus' contribution here. Might have been overthinking this fly hedge -looking at juice ratios vs open pnl,etc when atticus's take "half the gain" seems efficient. Still don't know what tipping point to use to hedge vs. take off the position specially if there is still > 5-8 days till exp as detailed in my prev post. Any suggestions are welcome. Thanks again Atticus.
Thanks guys. I just covered my ES futures short (hedge) at 42.00 for a gain of 8. That reduced the debit risk on my NDX fly to 25.25. I will hold it through NDX settlement tomorrow morning.
I often take an "80% approach", although you should substitute any percentage that you are comfortable with. Since the market feels a bit capped here, I like to buy an SPX call and sell 2 more (15-20 points higher) for a small debit or maybe free if there's enough time left. Let's say we do the 1540/1560C. When I can roll the 1540C up to 1545C for $4, I do it. I do the same for the larger downside flys that I put on. Obviously it works best in choppy or flat markets, which we have most of the time. I give up a bit of profit (and loss), but it helps me strike a balance between taking the position off and leaving funds on the table. I've also found that this works much better with the weeklies.