Trading with Krugman

[sle]

Sell straddles, sell 30 delta strangles, sell 5 delta strangles, buy stock and sell 2 50 delta covered calls per 100 shares, or sell 3 35 delta calls, jade lizards, iron condors, on and on I could go. Millions of different possible types and combinations of strategies. All are "portfolio delta neutral" and all would have vastly different risk and returns in the same year.

Sorry, what's the statement you are trying to make?

 

[krugman25]

Sorry, what's the statement you are trying to make?

A response to your question about a delta neutral portfolio outperforming a trending market.

The statement is in the post.

 

[nooby_mcnoob]

You are very well organized, I'll give you that at least

4 real, I'm embarassed for myself.

 

[krugman25]

4 real, I'm embarassed for myself.

Dang, no laughing smiley's. This will have to do.

 

[sle]

A response to your question about a delta neutral portfolio outperforming a trending market.

Did I ask that question?

On a serious note, delta-hedging a portfolio in a trending or a mean-reverting market is Options 201 (advanced, but not too advanced). However, it does become a very advanced once you start thinking about the dynamics of the implied volatility as a function of the underlying trend.

 

[nooby_mcnoob]

How can you only risk 1% if you keep rolling losses until theta makes you whole?

Also, it seems like you're doing way too much at the same time, but you seem like a smart dude and I know smart dudes make lots of money in the markets

 

[krugman25]

Did I ask that question?

On a serious note, delta-hedging a portfolio in a trending or a mean-reverting market is Options 201 (advanced, but not too advanced). However, it does become a very advanced once you start thinking about the dynamics of the implied volatility as a function of the underlying trend.

True and it is more complex than you are describing. It involves all of the greeks and their derivitives.

So I will reiterate what I said. I can't answer your question because it is too vague. It depends on *how* the portfolio is achieving delta neutrality. There are millions of strategies, variations and combinations that can all be "delta neutral". All will have different profit and risk profiles, different greek behaviors.

I would love to run a few million combinations for you and tell you your answer, but i'm just a guy with a journal.

 

[krugman25]

How can you only risk 1% if you keep rolling losses until theta makes you whole?

Also, it seems like you're doing way too much at the same time, but you seem like a smart dude and I know smart dudes make lots of money in the markets

Not a smart dude, I just play one on T.V. lol.

Risking 1 percent is for price action trading, not short options trading. You are conflating the 2 things.

 

[nooby_mcnoob]

I'm not smart enough to know, but feels like there's a blowup waiting for you somewhere with this approach.

 

[krugman25]

I'm not smart enough to know, but feels like there's a blowup waiting for you somewhere with this approach.

If my deltas get out of hand and I overleverage on correlated positions, without a doubt it will be waiting.