The funny thing is you pick the one parameter (Delta) That however peculiar it sounds, I never considered a risk, as it is not created by optionality. Delta is a choice.
Risk-free outcome. Not a chance. You are left with a whole smorgasbord of residual shit --> theta, vega, gamma, 2nd + 3rd deriv vol...
Ideally, the game of the MM (theoretically) is to rotate trades as fast as possible as often as possible, flipping back and forth as close to neutral as possible and capture some edge on each piece, with as little residual risk as possible. Flat is impossible, nearly flat moderately possible, but you will always have some risk somewhere, which requires an ability to manage those risks, in whatever way possible.
2. Ddi you always aimed to be delta, gamma, vega, theta... neutral at all time if possible, and if so were the profits significant and justified being a MM? And did you ever take directional bets, delta or vol?
Delta - Nightly yes, during day, that's a story unto itself, in an attempt to capture your theta by managing your gamma.
All the others had more to do with change in position vs change in variable (mostly price, time, vega)... You wanted the dynamics of the position to always turn positively for you as variables changed. I worked for a firm that was definitely considered a strict, risk-free arb firm. We took RISK! but certain types were acceptable and expected, and we entered into them with edge. positive gamma = good, negative =bad. Owning tons of wings --> you damn best better. Owning the wings where vol was going to pop -->damn best better. Owning ATM strikes -->major no no... that's what financed the wings and kept you flatish near ATM, and kept you from getting wrecked if nothing was moving.
...see how this can go on and on forever.
Yes, extraordinarily profitable if done right, or you get the moves. Could be somewhat painful if you didn't, but rarely horribly so.
I always thought dynamic was a good word.
Just woke up and need to take my dog. Hope that made a little sense.
Priceless!