At what point does a delta neutral postion unbalance ?

[kinggyppo]

Quote from nathanir:

kinggyppo
You surely mean go long 2 ATM puts to neutralize the 100 delta of 100 shares?

correct long 2 .50 delta puts makes you flat

 

[newwurldmn]

Quote from Aston01:

Does the situation tend to be more exacerbated in longer term trade (i.e. one where you hold the position days or weeks) or a shorter term trade ( i.e. position held minutes or hours) ?

And does opting for an OTM delta neutral position somewhat mitgate the issue or create even more of a problem.

BTW - Thanks for the feedback ...I know there are holes in my understanding and I am trying to make the effort to close some of them.

In options, maturities that are shorter dated and at the money exhibit the most gamma. As said before this represents the change of delta vs change in stock price. And the longer you wait to rebalance, the more likely it is you'll have a larger imbalance in your deltas.

Delta hedging is very much an art and everyone has a different view when one should rebalance and even to what your real delta is. Often the model delta isn't complete to your risk profile.

If you start trading options delta neutral, you'll have to worry about some other risks as well (such as change in gamma, etc). It's not difficult to do, but you should be aware of it.