A response to your question about a delta neutral portfolio outperforming a trending market. The statement is in the post.
Did I ask that question? On a serious note, delta-hedging a portfolio in a trending or a mean-reverting market is Options 201 (advanced, but not too advanced). However, it does become a very advanced once you start thinking about the dynamics of the implied volatility as a function of the underlying trend.
How can you only risk 1% if you keep rolling losses until theta makes you whole? Also, it seems like you're doing way too much at the same time, but you seem like a smart dude and I know smart dudes make lots of money in the markets
True and it is more complex than you are describing. It involves all of the greeks and their derivitives. So I will reiterate what I said. I can't answer your question because it is too vague. It depends on *how* the portfolio is achieving delta neutrality. There are millions of strategies, variations and combinations that can all be "delta neutral". All will have different profit and risk profiles, different greek behaviors. I would love to run a few million combinations for you and tell you your answer, but i'm just a guy with a journal.
Not a smart dude, I just play one on T.V. lol. Risking 1 percent is for price action trading, not short options trading. You are conflating the 2 things.
I'm not smart enough to know, but feels like there's a blowup waiting for you somewhere with this approach.
If my deltas get out of hand and I overleverage on correlated positions, without a doubt it will be waiting.