Gamma determination

Quote from FullyArticulate:

In my case, beta is always measured against the S&P. Although that's simplistic, it's easier for hedging purposes (and has worked reasonably well for the last few years).

Beta can't really be "unreliable", it's just a statistical measurement, not a predictor. In my case, it's based on the last 20 trading days. Why 20? It's just a number that has worked for me. But, since it's a sliding measurement, every day a new beta-delta is computed. In general, the skew is extremely small, I've found.
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what are doing when beta changes a lot over one day ( when large % change day dropping out of 20 days calcs). How does its affect current delta position ?
 
Quote from FullyArticulate:

So, I "invented" (although I'm sure I'm not the first) this idea of beta-adjusted delta. If a stock has a beta of 1, it will move an equal amount to the S&P 500. A beta of 2, and it will move twice as much. So, overall, if my portfolio is loaded up with bull spreads and calls on high beta equities, my beta-adjusted delta will be extremely positive. This means I'm not doing a very good job factoring out the "broad market". In essence, I can only make money if the S&P goes up.

Tracking my portfolio beta-delta forces me to look for underperformers, or at least to buy hedging puts against the market in the worst case. In the end, I'd like to make money no matter what the S&P does.

Beta-Delta = equity's beta * leg's delta

I hope that all makes sense. [/B]
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The TOS platform has this built in to the portfolio monitor page and will beta weight all the greeks to any underlying you'd like, including indexes. It really changed the way I monitored my holdings.
 
Quote from IV_Trader:

what are doing when beta changes a lot over one day ( when large % change day dropping out of 20 days calcs). How does its affect current delta position ?
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The biggest single day move I've seen in beta is .05. Generally that's within my "slop" size before I make adjustments. Coming up with the slop size is hard. Same with a gamma negative, delta-neutral position. How far does delta go before you "fix it"?

I've made up some rules of thumb, but whether they're right or not, I'm not willing to argue. :-)
 
Quote from FullyArticulate:

The biggest single day move I've seen in beta is .05. Generally that's within my "slop" size before I make adjustments. Coming up with the slop size is hard. Same with a gamma negative, delta-neutral position. How far does delta go before you "fix it"?

I've made up some rules of thumb, but whether they're right or not, I'm not willing to argue. :-)
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I know what you mean , I got a lot of those (rules of thumb) too.
:)
 
Quote from MTE:

The benefit of beta weighting is that when you have a number of positions across various underlyings you cannot just add up the greeks to see your exposure to the overall market moves....
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I believe that is not be accurate. In fact, the standard deviation, which is part of the calculation of many of these greeks, is normalizing since it is a dimensionless number.

When you devide a number by STDDev, you get a normalized # accross equities.

nitro
 
Quote from nitro:

I believe that is not be accurate. In fact, the standard deviation, which is part of the calculation of many of these greeks, is normalizing since it is a dimensionless number.

When you devide a number by STDDev, you get a normalized # accross equities.

nitro
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Delta is a measure of how much an option moves given a $1 change in the price of the underlying, not some other stock or index. You cannot say that if a call option on IBM has a Delta of 0.5 then a 1 point change in the SPX will mean a 0.5 point change in the price of the IBM call.
 
Quote from damon_achey:

The TOS platform has this built in to the portfolio monitor page and will beta weight all the greeks to any underlying you'd like, including indexes. It really changed the way I monitored my holdings.
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Also on the Analysis tab :)
 
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