Really enjoyed, the examples made it crystal clear…. What is your take on, if the broker ends up with unfinished hedge… say call options… and due to it may have to sell it to the clients…. ?
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?
Really enjoyed, the examples made it crystal clear…. What is your take on, if the broker ends up with unfinished hedge… say call options… and due to it may have to sell it to the clients…. ?
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?
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.
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
yup helps a lot. thanks for responding. i see what i did wrong there.