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?!
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?
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.
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?!
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
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?
No need to over complicate things, both professionals and retail do it. I try to make things as simple as possible to manage.
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.
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.
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
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.
yup helps a lot. thanks for responding. i see what i did wrong there.