Delta Hedge vs Straddle?

[CyJackX]

Buying a Call and shorting vs. buying a Call and a Put. They're both delta neutral, but do they perform differently?

Does the greater cash requirement from hedging offer some advantage?

 

[xandman]

Wouldn't you be paying margin on the short stock regardless if you had the cash?

Margin is a significant cost of trading cost over time.

 

[CyJackX]

I am using SPX and ES options.

 

[CyJackX]

Yes; more specifically, I buy 1 SPX ATM and 1 ES, since 1 ES has half the exposure of 1 SPX.

I see the advantage of liquidity, mainly.

 

[xandman]

The following are calculations from CME SPAN. However, firm policies will probably require holding premium paid or collected.

I don't know why we see different margins if the positions are synthetically the same. I am on break from doing the math.

 

[xandman]

Yes; more specifically, I buy 1 SPX ATM and 1 ES, since 1 ES has half the exposure of 1 SPX.

I see the advantage of liquidity, mainly.

Trading that 1 long call plus short ES is a very different position. Then, you have a synthetic put. Might as well just buy a naked put.

 

[CyJackX]

Trading that 1 long call plus short ES is a very different position. Then, you have a synthetic put. Might as well just buy a naked put.

Huh? It's a synthetic straddle, not a put; it starts neutral, has upside.

1 spx is 100$ to the index, es is 50$ to the index, so 1 spx option moves like 2 es options.

 

[xandman]

Huh? It's a synthetic straddle, not a put; it starts neutral, has upside.

1 spx is 100$ to the index, es is 50$ to the index, so 1 spx option moves like 2 es options.

I completely missed that you were using SPX options. You are correct. That is a straddle.

Perhaps, the margin netting/offset agreement under SPAN (not sure what it is called) will provide you with the same margin savings as 1 short es + 2 long ES call margin. I don't know.

I recalculated the SPAN, it is $256 and $371 now. Probably from the move.

 

[water7]

Buying a Call and shorting vs. buying a Call and a Put. They're both delta neutral, but do they perform differently?

Does the greater cash requirement from hedging offer some advantage?

besides margin requirement,
stock has a fixed delta, while options has a dynamic delta, gamma, ..
so they will have a different delta number after the underlying (and time) starts to move

in gamma scalping, gamma is your friend
but you need to weigh whether additional gamma worth the additional theta you are paying
back to simple R/R

 

[CyJackX]

besides margin requirement,
stock has a fixed delta, while options has a dynamic delta, gamma, ..
so they will have a different delta number after the underlying (and time) starts to move

in gamma scalping, gamma is your friend
but you need to weigh whether additional gamma worth the additional theta you are paying
back to simple R/R

Ah, yes, didn't think about this...

A straddle offsets both delta and gamma.
A synthetic straddle offsets delta, but not gamma.
A synthetic position is therefore more responsive to moves in the underlying.
Thanks.

P.S. Found this for anyone who's interested. https://www.discoveroptions.com/mixed/content/education/articles/longsyntheticstraddle.html