Hedging with synthetic forward on SPY - how-to and is it the best option?

[solk]

Hi,

I am looking for a way to delta hedge my position on SPX with an instrument that has 10 delta. That is, if I am using the emini I will have 50 delta for each contract, that means I can't hedge 30 delta.

I found 2 options - SSF on SPY or Synthetic Forward on spy, which gives me roughly 10 deltas and provide precise hedging.

Problem is, the spreads are huge and not liquid. My questions are:

1. Any other ideas on how to hedge an SPX position?
2. How do I construct a synthetic forward? I see that each strike and month have a different delta and theta and that the prices are not always equal.

Thanks

 

[Robert Morse]

You can use an SPX option that has 10 delta. That way all your positions are 1256 contracts. I would keep this simple.

 

[solk]

Hedging with option will change the greeks of my position. I only want to hedge delta, withouth introducing new theta and gamma

 

[Robert Morse]

100 shares of SPY is 10 delta of SPX.

 

[solk]

yes, but the cost 24,500 dollars, even with margin is $6000 for 10 deltas