Delta Neutral Organization

[spindr0]

Quote from Andy_Trade:

"At what Delta limit do you adjust ? Any why that Delta limit ?"

I would also like to learn about this. 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.

What is the way to determine how often you adjust and what are the variables at play?...do you use a percentage of delta??

Andy,

Just a follow up to the question that we both asked previously. For long straddles (which I'm dabbling with and adjusting with stock), in terms of delta, from everything that I've looked at, it's not at how much delta you adjust but when you adjust.

There's no magic delta number to adjust at. Ignoring IV change, delta neutral profit comes from price change and reversal. The ideal place to adjust is when the underlying peaks or troughs. Now if I can only figure that out, I'm golden

If you adjust early, before the reversal, the adjustment diminishes the ongoing option gain. If you adjust late, after the reversal, you give up some of the ITM option gain.

This is all in terms of underlying price and delta. IV change (the other big P&L factor) and time decay are being omitted to simplify the example's answer.

 

[iloveoptions]

Quote from spindr0:

Andy,

Just a follow up to the question that we both asked previously. For long straddles (which I'm dabbling with and adjusting with stock), in terms of delta, from everything that I've looked at, it's not at how much delta you adjust but when you adjust.

There's no magic delta number to adjust at. Ignoring IV change, delta neutral profit comes from price change and reversal. The ideal place to adjust is when the underlying peaks or troughs. Now if I can only figure that out, I'm golden

If you adjust early, before the reversal, the adjustment diminishes the ongoing option gain. If you adjust late, after the reversal, you give up some of the ITM option gain.

This is all in terms of underlying price and delta. IV change (the other big P&L factor) and time decay are being omitted to simplify the example's answer.

spindr0,

You're on the right track. You're also finding out that other critical variables need to be correctly solved also to get this thing to work consistently. Now you understand from my previous post why it's not as easy as it looks. Unfortunately, many of the answers that you're seeking are NOT found in books, seminars, videos ...etc. All the best in your quest for true knowledge.