9 Comments

I got-11.5 Cumulative Delta and Hedged it with 5 Long underlying, 5 long call deep ITM, 1 short put deep ITM, 1 long call ATM? I get the principle of it I think, but guess there are better combinations to be had when hedging?!

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Longing a call ATM would Change cum delta because you’re already short calls? Unless price has changed. I’d do long 11 underlying and short ATM put

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Yes, I got you. Is it also better to have less positions open when hedging to keep on top of things? eg I had 4 different hedges whilst the example you gave me in reply only had 2?

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No need to over complicate things, both professionals and retail do it. I try to make things as simple as possible to manage.

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I'm giving this a try : in your example I get a Delta of -11.5.

To Delta hedge : buy 11 ATM calls, and buy 6 futures.

I don't know if my Delta hedge makes any sense or not.

Just trying to get a feel for this !

I would like to hear more about futures and hedge/Delta hedging.

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Spot on. Well considering the position is already short 3 ATM calls you'd change the cumulative delta by buying ATM calls. Buying 11 of the underlying/futures and short an ATM put would work.

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ty for the post. to answer your question couldn't you just do nothing since your cumΔ is already 0? here is my work:

S 4x futes = (-4)x(-1) = Δ4

S 3x ATM c = (-3)x(-.5) = Δ1.5

L 6x deepITM p = (6)x(-1)= Δ-6

cumΔ=0

for next post mark me down for hedging w/futures

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I think you were mistaken by the second table inserted in here. That showed what the cum delta was for a position. I can see where you've gone wrong.

Correct maths is as followed:

Short 4 Futures = (-4) x (1) = -4

Short 3 ATM Calls = (-3) x (0.5) = -1.5

Long 6 Deep ITM Puts = (+6) x (-1) = -6

Cum Delta = -11.5

I hope me showing the maths helps, DM me on Twitter or email me lordfed@protonmail.com if you would like more of an explanation.

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yup helps a lot. thanks for responding. i see what i did wrong there.

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