We are slow learners but I am learning slowly.
I am confident that you will figure this out.
Continous hedging as a rachet device to lock-in profits
- Thread starter botpro
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I am confident that you will figure this out.
My latest research results with selling Call options with basic dynamic delta hedging:
1) One makes a profit only if Sx < S0. Sx=S0 means break-even.
2) The profit is even linear: the maximum is at Sx <= K; then it is the full credit.
3) If Sx > S0 then one makes a loss.
4) Volatility changes seem to have zero effect on the result.
(S0=initial spot, Sx=spot at expiration, K=strike)
Hmm. aren't some spread options not better, and much easier, than the above delta hedging construct?
1) One makes a profit only if Sx < S0. Sx=S0 means break-even.
2) The profit is even linear: the maximum is at Sx <= K; then it is the full credit.
3) If Sx > S0 then one makes a loss.
4) Volatility changes seem to have zero effect on the result.
(S0=initial spot, Sx=spot at expiration, K=strike)
Hmm. aren't some spread options not better, and much easier, than the above delta hedging construct?
