Hedging Volatility

Quote from TM1982:

Do any of you who trade vol hedge your deltas based on implied deltas? Or do you have another method?
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What's an implied delta? If you mean a delta calculated using the implied volatility, then yes, that's generally how it's done.
 
I am thinking to do a volatility analysis of volatilities (implied plus both the underlying and its options) in order to hedge not only delta but also gamma values.

I haven't figured out whether I should later add further calculations about the delta implied volatility gamma of the vegas and theatres of all options yet.

Will keep you guys updated!
 
Quote from dmo:

What's an implied delta? If you mean a delta calculated using the implied volatility, then yes, that's generally how it's done.
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Sorry Typo, yes I meant implied volatility. I'm wondering if some places hedge slightly different than just straight using the implieds.
 
Quote from TM1982:

Sorry Typo, yes I meant implied volatility. I'm wondering if some places hedge slightly different than just straight using the implieds.
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Generally speaking, you want to use the actual implied volatility, for the same reason you use the actual number of days remaining and the actual price of the underlying.

However, there are some different approaches. Some like to use the actual IV of each strike to calculate the delta of that strike, others prefer to use one IV (probably the ATM IV) to calculate the delta of all strikes. It just depends on what you're doing and how you approach option trading.
 
Quote from OddTrader:

I am thinking to do a volatility analysis of volatilities (implied plus both the underlying and its options) in order to hedge not only delta but also gamma values.

I haven't figured out whether I should later add further calculations about the delta implied volatility gamma of the vegas and theatres of all options yet.

Will keep you guys updated!
More...

If you want to hedge everything you say, you will need very large positions so that a one-lot here and a two-lot there can bring your multi-decimal point numbers to zero.

How are you going to earn a profit doing that, unless you can buy at the bid and sell at the offer?

Mark
 
Quote from dagnyt:

If you want to hedge everything you say, you will need very large positions so that a one-lot here and a two-lot there can bring your multi-decimal point numbers to zero.

How are you going to earn a profit doing that, unless you can buy at the bid and sell at the offer?

Mark
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Thank you for your love in replying my silly post before reading it carefully! :)

Quote from OddTrader:

I am thinking to do a volatility analysis of volatilities (implied plus both the underlying and its options) in order to hedge not only delta but also gamma values.

I haven't figured out whether I should later add further calculations about the delta implied volatility gamma of the vegas and theatres of all options yet.

Will keep you guys updated!
More...
 
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