Hello, i have a fair amount of experience in spot and future trading but i am about three weeks into options.
A trading system that i am developing requires this part. A short spot trade will be hedged by the option contract such that after (ex 50) points of ITM call and 50 points of loss from spot they both close with nearly zero loss.
Buying naked call is too expensive so I was thinking of vertical spread. But the Sell call is cutting into my profit from Buy call severely. Like i can only see 20% net profit of whole 50 points. The Goal as i said, is to make profit equal to the loss of spot trade.
Some ideas i had was to let it run and let short call position to go ITM as well. As well as Buy 2x position if the delta is 0.5 at the opening of the position.
Am i on the right track? Is there any other spread combination that will be more suited for this? Like buying and sell of calls at a different date?
Thanks in advance
Cheers!
A trading system that i am developing requires this part. A short spot trade will be hedged by the option contract such that after (ex 50) points of ITM call and 50 points of loss from spot they both close with nearly zero loss.
Buying naked call is too expensive so I was thinking of vertical spread. But the Sell call is cutting into my profit from Buy call severely. Like i can only see 20% net profit of whole 50 points. The Goal as i said, is to make profit equal to the loss of spot trade.
Some ideas i had was to let it run and let short call position to go ITM as well. As well as Buy 2x position if the delta is 0.5 at the opening of the position.
Am i on the right track? Is there any other spread combination that will be more suited for this? Like buying and sell of calls at a different date?
Thanks in advance
Cheers!
