what is the purpose of delta hedging?

[taowave]

To avoid gamma extinction while capturing as much juicy Theta as you can take down while throwing a vol crunch party

 

[traider]

Delta hedging allows one to work through and derive the pricing models for options

 

[caroy]

I understand they better not be traded to expiration, I am aiming at 10%-20% approx from IV and theta decay as I think the delta would get more complicated to manage closer to expiry.

I gravitate with flies to the other side. I usually only trade them with one day to go. Most of the profits come when the fly opens or goes full carry which with high IV stocks doesn't really happen till the end. I need to start looking into doing some longer term ones with lower profit targets as well but they seem to move pretty slow until they get close to expiration.

 

[DiceAreCast]

An account since 2005, 1800 posts and then this kind of question? Did you spend the past 15 years in an opium den in Bangkok and let your chimp type away on ET?

I see things about if a position is losing, you buy something else such that deltas are even. Like if your delta is -400, you go over one strike and sell enough that the delta of your position is around 400.

What does that do?

I simulated this in Think or Swim but don't really get it, it looked like a trade long.

 

[DiceAreCast]

What? Lol. This is pure entertainment

Delta hedging allows one to work through and derive the pricing models for options

 

[MarkBrown]

to try and stay neutral while selling option premium to fools who have shallow pockets and hope.

 

[destriero]

Brown lives in a $250K hovel. His 20YO avatar pic is seen throughout Dunning Kruger's latest edition.

BTW, what is the barrier to entry on these vol-threads? Because clearly it's as porous as Trump's asshole fence.

 

[newwurldmn]

Brown lives in a $250K hovel. His 20YO avatar pic is seen throughout Dunning Kruger's latest edition.

BTW, what is the barrier to entry on these vol-threads? Because clearly it's as porous as Trump's asshole fence.

Browns busy arbitraging Fararees.

 

[IronFist]

You mention TOS here is their write-up.

https://tastytradenetwork.squarespace.com/tt/blog/tasty-bite-trading-delta-neutral

TOS = think or swim

 

[IronFist]

Delta hedging (as per the title of the thread) aims to remove directionality from a trade by offsetting the delta of one position (say the -400 in your example above) with another position (i.e. you would need a +400 delta in your 'hedge'). Your combined portfolio delta should be as close to zero as possible.
Rather than directionality, your total portfolio will now be more impacted by other 'Greeks' (time, vol, rates, ...).
It is important to realize that delta hedging is not static, read up on Gamma (and other greeks) if you need more info.

yep I need to do this. I learned about Delta and Theta, this is it.