Hi Bob, nice web site, shame you gave up updating the data. i have pass the stage of paper trading and have been doing some delta neutral trades. Buying a call + put is delta neutral but as you said that is a quick way to loose money as there again you are hoping for some big movements. If you are going to trade for the big movement, then big movement you are hoping for, must come unexpected as movements after pre arranged announcement are no good, as the market already prepared itself for the big movement by increased vol The way I am thinking or looking for a way to trade delta neutral is that I do not want to deal with X factor. good luck!
Hi Chisel, How successfully were you during your on the floor neutral trading?? Were you doing Indexes and QQQs or individual shares?? I have done delta neutral trades on FTSE100 index options which involved FTSE futures as well as buying and writing CALLs and PUTs. First thing I was taught on options that You can only make money by writing options. Would you agree with that?? On my delta neutral trades I mostly used futures one side ,options on the other side. I was mixing buys and writes so that i get neutral theta I have started to trade US market recently and done some simple delta neutral trades on CSCO. But i want to move on index options: I have been looking into E-mini and DJX options. There seem to be little retail activity on DJX options and spreads are bad. At the moment thinking of using E-mini nasdaq versus QQQ options and studying if it is the right match to create Delta neutral good luck! ps: Re: the book you have mentioned:I would be interested in a book which covers more then basic pricing models and maths behind it. What topics does it cover??
I`ve tried them some time ago. Harder to make money then it looks. At that time Mr. Kaplan`s strategies were very popular (Opportunities in Options) Some of them covered "worst case scenarios" i.e. when market moves too fast against You, which I find the most important in delta neutral strategies.
I tried it before but doesnt really work in actual trading as good as in theory. Here is a webpage which I saved describing an actual trade - http://www.geocities.com/wealth_lab/trades_EN_20001108_CPQ_HEDG.htm The original poster is a Belgian - he has already taken out his website. pretzel
The money which can be made in delta-neutral trading ofcourse has no comparison to money which can be made doing directional trading on futures, stocks and options. The question is...Can you get the direction right all the time??? good luck
What was the overall result of the trades you have listed on the above mention website? I try to take profit on every adjustment, but I do not adjust for small slippages. good luck
I have been wrong with my deltas, really really f$@%ing wrong, and not lost a dime. On the other hand, I have been right with my deltas, totally leaning the right way, and lost money. It is the position that you carry in relation to a multi-dimensional environment which determines whether or not you make money. Many people here will say don't be short a naked short straddle. The opposite is also true, don't be long a naked long straddle. At least with a naked straddle, chances are you will feel the pain in one large drop. With a long straddle, you will feel agony every single day, tick by lack of tick. I would say I blew out twice because of long premium, but, it is a lot more complicated than that. Do you need to sell options to make money? Absolutely! As stated above, the opposite is also true. When trading delta neutral, you worry about other greeks a lot more. I would say this; short premium is much kinder than long premium. I don't think it is possible to trade a long naked straddle delta neutral unless you are buying the options at a significant discount to future volality. To do otherwise, you would have to be a good stock trader. In other words, be a good day trader. There aren't that many people out here who can do that. No worries, with options, you have four other greeks. A simple idea would be to buy a call spread and sell stock against it. You could gain on a volatility contraction as the stock ran up or a volatility explosion on a sharp move down. In this scenario, your long premium is hedged. There are lots of scenarios. I would reiterate that you should read Natenberg and Cottle. As other have stated, delta neutral is a loaded term. Also, don't let people tell you it is impossible to get an edge when trading with MMs. Most of my best trades were with other MMs. That one though, hmmmm, fucked me twice. But, you need to know what your doing, so post!!
Nugya, I traded options on futures the entire time on the floor, mostly in the financial room at the CBOT. As for only making money by writing options? Well...some people can do it. If you're wrong you must have extremely good discipline (and enough capital) to get out of a position that blows up in your face. I'd rather not face that situation, so I don't sell much premium. I sleep much better if I'm not short a bunch of it. I prefer to be long vol, but I realize it's easy to lose money that way also. To me, ONLY selling premium is like waiting for a time bomb to go off. Cottle's book covers much more than basic pricing models. It tells you how to dissect your option position, analyze your risk, what the skew is, and a zillion other nuances about options. Go to Amazon.com and read the reviews there. They help explain what the book's about.
nugya, The webpage was reproduced as is with no modifications. The author didnt include the overall results for that particular trade. I think the purpose of the page was just to demo how delta-neutral trading is done. pretzel