Come on, nobody would do anything for a zero return, don't you think?
I don't know about others, but when I would sell options and then even hedge it, then I would expect a guaranteed profit under normal market conditions.
Continous hedging as a rachet device to lock-in profits
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I don't know about others, but when I would sell options and then even hedge it, then I would expect a guaranteed profit under normal market conditions.
This is once again totally wrong thinking because you haven't read serious stuff about options ...
That thing is indeed complicated, and I think that not many people in the world do understand it, not even the many book authors and researchers/scientists...
cvds16 is right.
I think you were the one directed me to this site:
http://faculty.baruch.cuny.edu/lwu/9797/EMSFLec5BSmodel.pdf
Read the lecture given by Prof Wu. If you look at the Black Scholes equations:
If you use a Monte Carlo, in an ideal Black Scholes, you will get the same outcome with some statistical error. If you use real world data to back test, you may get a slightly different outcome.
Regards,
I'm not using the classical textbook definition of dynamic delta hedging, but a slightly different variant of it.
So I might have found a strategy or system. With it I secure the credit in all cases tested so far.
Ok, not much tests done yet, but still a spectacular result IMHO.
But I only hope that there is no bug in the code... God pls let there be no bug in the code...
So I might have found a strategy or system. With it I secure the credit in all cases tested so far.
Ok, not much tests done yet, but still a spectacular result IMHO.
But I only hope that there is no bug in the code... God pls let there be no bug in the code...
man this is totally basic options theory stuff ... it's the same delta but when you buy the call you sell the delta: so -60 for example, when you sell the call you buy the delta: +60.
But it doesn't stay like that: there you have gamma which will move your delta-position: when you are short the call you will need to buy addidional delta, when it goes down you sell delta (yes you buy high and sell low). So you will lose money with your heging (like people have been on and on telling you)
When you are long the call, you sell more delta on the up, and buy delta on the down (here you buy low and sell high).
But it doesn't stay like that: there you have gamma which will move your delta-position: when you are short the call you will need to buy addidional delta, when it goes down you sell delta (yes you buy high and sell low). So you will lose money with your heging (like people have been on and on telling you)
When you are long the call, you sell more delta on the up, and buy delta on the down (here you buy low and sell high).
Unless you are a market maker, when you buy you pay ask and when you sell you got paid bid. The difference is the market maker's profit and the delta for bid and ask should be different. Of course you can ask/bid for anything but won't get executed if it is too far out. Usually you offer mid point in between. Most of us, I think, used the mid point in our back testing.