Delta Neutral Organization

Discussion in 'Options' started by Andy_Trade, Oct 25, 2007.

  1. Hi spindr0,

    Your question(s) are quite appropriate. Forgive me if I didn't respond to you earlier. If I were to trade on your example that you just gave (not knowing the future), then I'll be quite happy with any profit that comes my way and adjusting with even a low +10 figure would seem appropriate because you don't have enough "confidence" to back you up and encourage you to stay longer in the trade to "hopefully" grab +20 and then adjust. You see, you never ever want to enter a trade without rigorously doing what are best case/worst case scenario and the resultant profit outcome. Lexus, BMW, and Mercedes among other high quality automobiles have strict and very stringent standards that they must adhere to if they want rave reviews from users. It must be no different in trading. So in my trading, I must know as much as I possibly can about the position that looks appealing on the surface before I scientifically structure it and ultimately inject money into it. Again, this is my own personal experience as I’m almost always a long gamma trader with rarely ever having to sell options. It doesn’t mean that you can’t do it by being a short gamma trader. It’s just that after vigorous research in the science of market behavior, longing options and hedging with other options correctly seems the appropriate strategy to use, as the rewards far exceed that of the short gamma strategies. I hope my answer was helpful.
     
    #21     Oct 26, 2007
  2. spindr0

    spindr0

    iloveoptions,

    I think that I just have to keep at it, trading small and increasing my feel for what I'm doing. For the most part, I'm trading by the seat of my pants based more on theory and less on experience. Again, thanks for the explanation.
     
    #22     Oct 26, 2007
  3. timbo

    timbo

    iloveoptions, you'll wait for 10 delta's before rebalancing? Amazing.
     
    #23     Oct 27, 2007
  4. If you have time on your side, experience and knowledge will follow. Thus it's a good idea as you say to start small and increase your size as your confidence and your results improve with time. That's what I had to do 4 years ago and I'm quite happy with that decision. You will make many mistakes and be humbled many times, but don't let it bother you. Best of luck in your trading.
     
    #24     Oct 27, 2007
  5. Is 10 delta's considered a lot or a little? What is the way to determine how often one neutralizes delta? :confused:
     
    #25     Oct 27, 2007
  6. dsss27

    dsss27

    Don't have any stake in this, but I stumbled onto this trader on the inet several years back that may address your concerns with delta neutral options trading.

    http://www.deltaneutral.com/
     
    #26     Oct 27, 2007
  7. timbo

    timbo

    It depends on curvature; replication can easily exceed your bank roll.
     
    #27     Oct 27, 2007
  8. Where can I learn how to make adjustments properly?
     
    #28     Oct 27, 2007
  9. I don't know where you can go to learn about proper adjustments. Perhaps right here delving deep into the old archives. You might find some good material on the internet. I had to learn it on my own by building a model and working from there.
     
    #29     Oct 27, 2007
  10. Yeah, I've looked far and wide on elitetrader, traderji ect. but I can only find some examples such as adjusting every 100 deltas that's off ect. But in that example, the poster was working with several thousand delta if I remember correctly.

    Searching for delta neutral on traderji I found a couple examples of delta neutral trades on NIFTY futures and it was a great read. Just converted rupees to USD and I learned quite a bit.
     
    #30     Oct 27, 2007