Is there a way to use call or put backspreads with delta neutral trading, or is it not even suited for delta neutral?
Thanks
-Andy
Thanks
-Andy
Delta Neutral Organization
- Thread starter Andy_Trade
- Start date
iloveoptions
At what Delta limit do you adjust ? Any why that Delta limit ?
Andy
You could adjust any spread to delta neutral, but in the context of "gamma scalping" the long straddle is the most suited spread.
At what Delta limit do you adjust ? Any why that Delta limit ?
Andy
You could adjust any spread to delta neutral, but in the context of "gamma scalping" the long straddle is the most suited spread.
Strongly suggest you read Natenberg, Options Volatility and Pricing. The people on the other side of your positions know it by heart.
As for the effect of IV changes, that is measured by vega, which any decent options program can display.
Personally, I think delta neutral, or gamma scalping, is a tough way for a retail trader to make a buck. As fees have come down, no doubt it's easier, but the accummulated fees and spreads add up.
As for the effect of IV changes, that is measured by vega, which any decent options program can display.
Personally, I think delta neutral, or gamma scalping, is a tough way for a retail trader to make a buck. As fees have come down, no doubt it's easier, but the accummulated fees and spreads add up.
Quote from Andy_Trade:
So what would be the correct way to neuter positions (based on the type of trade; long straddle, short strangle, market moving up a lot, a little, sideways, down a lot, down a little.)
Do you know where I can read more about the proper way to neutralize a position according to strategy used and the market conditions?
It seems everything I've read so far in the last couple months is good general information, but no specifics for all the different styles of trading...
Since I don't know where you're positioned on the learning curve and don't know your risk tolerance, perhaps this link would help you choose what you're looking for.
http://www.amazon.com/s/ref=nb_ss_gw/002-8787793-2307230?initialSearch=1&url=search-alias%
Sorry, here's the complete link.
http://www.amazon.com/s/ref=nb_ss_g...s=aps&field-keywords=delta+neutral+strategies
iloveoptions,
Let's suppose I'm long straddles and I'm gamma scalping against it. If IV increased, would you ever sell an OTM option against the position (making sure not to lock in a loss) in order to take advantage of the higher IV? Or do you avoid "neutering" the position regardless?
Per 100 delta straddle, at what amount of + or - delta movement would you adjust with stock?
What time frame do you use? Delta moves more in the current month but time decay becomes a larger factor toward the end. At what point do you close (or roll) the straddle?
TIA
Let's suppose I'm long straddles and I'm gamma scalping against it. If IV increased, would you ever sell an OTM option against the position (making sure not to lock in a loss) in order to take advantage of the higher IV? Or do you avoid "neutering" the position regardless?
Per 100 delta straddle, at what amount of + or - delta movement would you adjust with stock?
What time frame do you use? Delta moves more in the current month but time decay becomes a larger factor toward the end. At what point do you close (or roll) the straddle?
TIA
I adjust based on what my proprietary volatility model is predicting in regards to F.R.V. (future realized volatility) and I.V. , Not based on profit targets. But that is just one variable of many that I have to constantly monitor and solve on a day by day basis. Then you have to work hard on getting your timing correct, solving for velocity, price bar structure, contraction and expansion of daily/weekly bars, time frame relationships, and price deviations and a few other techniques I have developed that I won't get into. But my work have just began, because after I generate a confidence level that has to be acceptable and backed with a positive statistical significance, I then input that value in my options pricing model that I have developed and see if a true edge exists (or none). Then you have to figure out the optimum amount of $$ to inject into the trade and how to properly adjust in timely fashion. As you can see, it's a difficult and highly specialized work that took me 5 years to develop and get quite comfortable with, that not many people have the time, patience, as well as the resources to do this on a consistent basis without being stressed out. If it wasn't mentally stimulating and very challenging that brings joy to me, I would be doing something else. So as you can see, trading is already hard enough, but trading with options and solving for multiple variables is another matter. Best of luck in your trading.
iloveoptions
Thanks for your detailed reply.
I had assumed that you "mechanically" scalped whenever a pre-determined delta was reached, and I was curious as to how you determined the delta trigger. I have operated a few gamma scalping spreads with index straddles (adjusting with futures) on a number of occasions but with limited profitability (i.e. profit not really worth the effort) and my quandry was the delta trigger.
But I can see there's quite abit of subjectiveity in your methodology, but if it works for you I'll not knock it. Good luck.
Thanks for your detailed reply.
I had assumed that you "mechanically" scalped whenever a pre-determined delta was reached, and I was curious as to how you determined the delta trigger. I have operated a few gamma scalping spreads with index straddles (adjusting with futures) on a number of occasions but with limited profitability (i.e. profit not really worth the effort) and my quandry was the delta trigger.
But I can see there's quite abit of subjectiveity in your methodology, but if it works for you I'll not knock it. Good luck.
iloveoptions,
Thanks for the detailed reply. I appreciate the rocket science of what you do and I could not begin to comprehend it at my level of understanding. I'm not asking you explain the components of your trading system or about all of the other things that I need to work on. I posed simple questions and I'd appreciate it if you could/would think on my level. I'll rephrase...
If I have one long straddle and delta changes and not knowing what the future will bring (IV, price, etc.), at what point should I consider adjusting? +10 delta? +20?
As expiration approaches, iIs there a point in time where it makes more sense to get out of the current month options?
If these questions are too simplistic, I'll understand if you forego replying.
Thanks for the detailed reply. I appreciate the rocket science of what you do and I could not begin to comprehend it at my level of understanding. I'm not asking you explain the components of your trading system or about all of the other things that I need to work on. I posed simple questions and I'd appreciate it if you could/would think on my level. I'll rephrase...
If I have one long straddle and delta changes and not knowing what the future will bring (IV, price, etc.), at what point should I consider adjusting? +10 delta? +20?
As expiration approaches, iIs there a point in time where it makes more sense to get out of the current month options?
If these questions are too simplistic, I'll understand if you forego replying.
I would also like to learn about this.
I don't know the answer to either question. I've done a lot of searching for info on DN trading I've seen people throw out numbers such as: adjust when you're off 100 deltas, ect.
But in some of the mocks I'm putting on, such as a Strangle on WYNN, I only started with 96 delta equal on both sides to begin with (sold 4 175 calls Delta: .24; sold 8 125 puts Delta: -.12)
What is the way to determine how often you adjust and what are the variables at play?...do you use a percentage of delta??
ps
Gamma scalping tries to profit from changes in options deltas in a volatile stock correct?
Thanks