Delta Neutral Strategy

ASusilovic · Sep 16, 2007

Quote from scriabinop23:

here you are reverse gamma scalping I assume.

but one suggestion: at 5 ES options and 1 futs contract, i don't think you have appropriate position size to accurately hedge your deltas. (since futs qualify as 100 deltas each) If you have portfolio margin, perhaps doing it thru SPY is better, that way you can perfectly hedge. ES is appropriate for this moreso if you are short 25+ options.

As the underlying goes up, you should be BUYING more (maintaining flat delta). Inverse is true - you should be selling as it goes down to maintain a flat delta. dynamic hedging...

now i've never done it, because gap risk and the idea that you are selling a low market, buying a high market doesn't suit me.

atticus:?? how frequently would you dynamically hedge on a short gamma position ??? price intervals???

Considering long gamma scalping is a tough strategy that doesn't really easily work unless you get plenty of movement, perhaps this is fundamentally a bet that volatility will subside and price will stay still. Ever think of doing vix futures calendar spread instead?
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Dynamic Hedging is an art ! If you want some theoretical background read this introduction :

http://finance.wharton.upenn.edu/~benninga/mma/MiER71.pdf

Simon Benninga and Zvi Wiener are offering some further interesting articles like the one on "Binomial Option Pricing, the Black-Scholes Option Pricing Formula, and Exotic Options"

http://finance.wharton.upenn.edu/~benninga/mma/MiER64.pdf

ASusilovic · Sep 16, 2007

Quote from atticus:

I forecast IV and distribution 5 days forward, which gives me an acceptable cushion. I don't hedge discretely unless on meth.
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ItÂ´s all about cushions, atticus, isnÂ´t it ?

IV_Trader · Sep 16, 2007

When its comes to gamma scalping ...learn how to scalp/hedge mix positions (calendars , verticals)

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Delta Neutral Strategy

ASusilovic

ASusilovic

IV_Trader