Dynamic and Static Delta Hedging

Brighton said:
That sounds like a thorough test. I thought if you were just getting started, the results might be skewed by the price and vol moves in corn, wheat, hogs, sugar and coffee over the last several months, some of them quite significant.
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There were certainly some huge moves in the grains along the way, for example in summer 2012 and earlier in the year in 2013. Quite often the weekly hedging does seem to get caught at the turn, with the delta wrong for a whole week at least as an adverse move takes place. Maybe I just need to have weekly hedging with daily "hedge stops" or some such.

But weekly hedging seemed to worsen performance and drawdown in almost every month, with a few exceptional months where it did help. Daily hedging does improve performance overall.

Weekly hedging does seem to improve results relative to no hedging in some strategies that take 6 month positions or longer, otherwise not.

But I need to test a delta band strategy and maybe that will work better, or maybe some gamma hedging.

Also I need to reverify everything in case I am mistaken.
 
Thanks for sharing.

Btw, with the currently elevated vols in grains, one would think you are actually dealing with lower gammas on the similar trades. Thus your delta bands will probably already getting touched less when flipping around the ATM strike.

Are you testing ATM or OTM strategies?
 
xandman said:
Thanks for sharing.

Btw, with the currently elevated vols in grains, one would think you are actually dealing with lower gammas on the similar trades. Thus your delta bands will probably already getting touched less when flipping around the ATM strike.

Are you testing ATM or OTM strategies?
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Thanks for your comments.

I am testing with a range of deltas both ATM and OTM (from 50 to 1). I am also testing spreads like 10-5 vertical and even calendar spreads - I have them programmed but am holding off on the calendar spreads mostly for now.

The delta bands certainly have potential and I guess should be a more practicable approach.
 
Wow. That's very thorough. You know what's a real money maker? If you sell an Amazon book on your whole research framework and methodology. I would be a buyer at the least. :p
 
xandman said:
Wow. That's very thorough. You know what's a real money maker? If you sell an Amazon book on your whole research framework and methodology. I would be a buyer at the least. :p
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Or, if you derived all the HVs, IVs and greeks on your own, and have rights (or could acquire rights) to resell the raw futures and options prices, go into the SaaS business and sell access to your dbase. I'd be a prospect.
 
Brighton said:
Or, if you derived all the HVs, IVs and greeks on your own, and have rights (or could acquire rights) to resell the raw futures and options prices, go into the SaaS business and sell access to your dbase. I'd be a prospect.
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Thanks! I agree there could be possibilities. They would, however, take a lot of time on my part.

First I want to see if I can discover some market inefficiencies that I can exploit in trading. That really should be possible.
 
how about an options order ticket app for complex spreads.

I suspect you may already have a futures spreader. So far, nobody has come to market with a spreader with the usability of Button Trader.

My guess you can get at least $100 per month subscription on that.
 
xandman said:
how about an options order ticket app for complex spreads.

I suspect you may already have a futures spreader. So far, nobody has come to market with a spreader with the usability of Button Trader.

My guess you can get at least $100 per month subscription on that.
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Those are really great ideas and I do not see why they should not be possible - thanks so much!
 
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