I'm still figuring a lot of this stuff out, and I'm trading Bitcoin options. Something that was frustrating me is that there is a non-trivial gap between the theoretical delta and the actual delta. Even when I was supposed to be delta neutral, I had a clear directional bias in my portfolio value. When I figured this out, I made a "best guess" adjustment to my delta hedging bot to keep my theoretical delta a little positive. Is this a problem in other kinds of underlying? Is it just a feature of the immaturity and liquidity of the Bitcoin options market? Is there an established was to find the "actual" delta of an option? Or am I just going to have to tweak it to try to iron out directional biases?
Delta represents the relationship between the underlying price and the option - Each of which the issuer/seller has the right to set his price. For Bitcoins you are not protected by best execution/SEC rules, the prices can be whatever. For stocks and index options traded on major exchanges I donĀ“t see those discrepencies you write about
I perfectly understand what you are implying, but I have no idea what you are saying. No need to speak in the abstract, if this occurred, put the numbers to it, otherwise everything you wrote is just noise.
Just curious, what formula and parameters are you using for your "theoretical" delta? And actual delta?