My option trades

Quote from newwurldmn:

You can delta hedge anytime you want. If you were long a put, you could have hedged in the after hours and flattend your short delta then and done okay.

Practically speaking, would you have wanted to be short a naked call here? And then as the stock was selling off would you have wanted to buy stock knowing it could have gone to $11.
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yeah this is not for everyone, its a moving target. I am just saying that if you are wrong on your position you can adjust your risk/hedge by trading the stock. What got me thinking about this was that while rimm opened down quite alot it basically traded back to even from 12.37.
 
I was long a lot of deltas into the Osama hit and shorted 72.00 in ES. I remember it vividly as I was less than a point off the high for the week. In these earnings situations it's critical (IMO) to have the ability to gamma-trade AH.
 
Quote from atticus:

I was log a lot of deltas into the Osama hit and shorted 72.00 in ES. I remember it vividly as I was less than a point off the high for the week. In these earnings situations it's critical (IMO) to have the ability to gamma-trade AH.
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If you could please expand on this. I have limited understanding of this myself. I think it could be helpful to some of the more intermediate option traders. The point I was trying make is that once the option exchange closes most retail traders assume they are done till the open. I never really thought about offsetting after hours with stock.
 
Quote from kinggyppo:

If you could please expand on this. I have limited understanding of this myself. I think it could be helpful to some of the more intermediate option traders. The point I was trying make is that once the option exchange closes most retail traders assume they are done till the open. I never really thought about offsetting after hours with stock.
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I am not a straddle trader, but imagine that you're long the XYZ 100 straddle from 6.00 and the shares close the day session at 102, and open the PM session at 107. Any price >$106 can be hedged 100-delta to lock in a break-even potential. Of course you would still have some extrinsic premium available in the straddle.

So you're in an earnings situation and you're neutral delta, long gamma. Stock opens up big. You would want to discount your greeks by a drop in vol and quickly calc your deltas at the new vol-line.

XYZ pops to 107 assuming a 500bp drop in vol. You deltas would increase quite a bit on your AH hedge due to the vol-drop. A 100-share hedge would lock-in $1 minimum gain on the position, less any extrinsic value in the straddle. Most would not hedge 100-delta, but would allow for more upside.
 
Quote from atticus:

I am not a straddle trader, but imagine that you're long the XYZ 100 straddle from 6.00 and the shares close the day session at 102, and open the PM session at 107. Any price >$106 can be hedged 100-delta to lock in a break-even potential. Of course you would still have some extrinsic premium available in the straddle.

So you're in an earnings situation and you're neutral delta, long gamma. Stock opens up big. You would want to discount your greeks by a drop in vol and quickly calc your deltas at the new vol-line.

XYZ pops to 107 assuming a 500bp drop in vol. You deltas would increase quite a bit on your AH hedge due to the vol-drop. A 100-share hedge would lock-in $1 minimum gain on the position, less any extrinsic value in the straddle. Most would not hedge 100-delta, but would allow for more upside.
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fair enough thanks.....:)
 
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