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Delta neutral Theta biased trading |
SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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Post: #331  Posted: Mon Jul 24, 2017 9:15 am Post subject: |
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SH,
Great!!! Keep it up!
I would appreciate if you can leave out "risk free" from this thread as nothing in trading/investing is risk free (maybe some kind of arbitrage is). This is especially true when short options are in play.
Other than that I feel this is good education for options traders. Would love to see how these trades play out when there is a sudden volatile decline and both price and volatility go against the trade. Whatever hedge is there (short options on the other side) become zero and the hedge disappears. Adjusting also becomes ineffective during such times. I have always had trouble with short options during such times. It is very important to state this when short options are used without hard hedge (like using futures to hedge).
Good luck!!!
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Srikanth Kurdukar
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Alchemist
Yellow Belt
Joined: 09 Aug 2010
Posts: 853
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| Post: #332 Posted: Mon Jul 24, 2017 9:26 am Post subject: |
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Hi ST - thanks for your observations and I agree with you, the right term is risk mitigated instead of risk free.. however it feels risk free to me now after trading it successfully for over an year now.
You are also right, selling multiple option legs can be risky in case of a black swan event however barring that, I have managed volatile movements successfully against the trade in the past. A good example was in Sep 16 when on the day of surgical strikes announcement Nifty and BNF crashed. In such cases obviously you need to be ready to buy some options to manage the position (instead of just relying on selling them) until the volatality dies.
Cheers
SH
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Alchemist
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Joined: 09 Aug 2010
Posts: 853
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| Post: #333 Posted: Mon Jul 24, 2017 10:17 pm Post subject: |
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| manojkr78 wrote: | | very good one.....are you posting any live trades during market hours |
Manojkr78 - I used to earlier when I had started the thread however not anymore. I share it live with my trading partners though and update the forum after mkt close.
The minimum capital requirement to trade this strategy is around 10 Lakhs so that one can target 50 thousand to 60 thousand profit per month. Anyone with lesser capital would not make enough per month anyways to make it worth the while.
Cheers
SH
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manojkr78
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Posts: 1014
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| Post: #334 Posted: Tue Jul 25, 2017 12:51 am Post subject: |
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| tnanks
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Redlionviji
White Belt
Joined: 22 Oct 2016
Posts: 47
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| Post: #335 Posted: Tue Jul 25, 2017 3:59 pm Post subject: Rocking performence SH sir...Keep it up...Great going... |
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Excellent Risk management...Risk is completely free compared to others one side (without hedge) trades....keep it up SH sir... 
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jeyasree
White Belt
Joined: 28 Sep 2016
Posts: 2
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| Post: #336 Posted: Tue Jul 25, 2017 5:01 pm Post subject: |
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| Sir, I am a budding Trader still in the process of Learning . Would like to know what is the %volatility u use in case of NSE/BSE stock options for calculating Delta (for Index options I use INDIA VIX) ?. Also I am using the 91 days T-bill rate which is currently at 6.23% as interest rate. Is it correct?
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Alchemist
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Posts: 853
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| Post: #337 Posted: Tue Jul 25, 2017 5:27 pm Post subject: |
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| jeyasree wrote: | | Sir, I am a budding Trader still in the process of Learning . Would like to know what is the %volatility u use in case of NSE/BSE stock options for calculating Delta (for Index options I use INDIA VIX) ?. Also I am using the 91 days T-bill rate which is currently at 6.23% as interest rate. Is it correct? |
Hi - you can use NSE website to look up IVs of each strike price. These IVs are calculated based on 10% interest rates by NSE
Cheers
SH
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jeyasree
White Belt
Joined: 28 Sep 2016
Posts: 2
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| Post: #338 Posted: Wed Jul 26, 2017 1:43 pm Post subject: |
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| Thank You, Sir. Your thread's a great inspiration.
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anika1010
White Belt
Joined: 17 Nov 2015
Posts: 2
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| Post: #339 Posted: Thu Jul 27, 2017 11:42 am Post subject: need password |
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hi
Can any one please PM me password for "Nifty Delta hedging results.docx" .
this file is password protected , i want to know the setup or desc of this strategy.
thanks Alchemist sir for great strategy .
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paa
White Belt
Joined: 28 Sep 2010
Posts: 178
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| Post: #340 Posted: Thu Jul 27, 2017 6:06 pm Post subject: |
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Thanks Alchemist 
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Alchemist
Yellow Belt
Joined: 09 Aug 2010
Posts: 853
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| Post: #341 Posted: Fri Jul 28, 2017 3:41 pm Post subject: |
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August strategy opened today
Bought 24500 CE (Aug) at 591
Sold 25000 CE (03 AUG) at 81
Sold 25500 CE (Aug) at 130
Sold 25500 CE (AUG) at 130
M2M profit at day end today is 5 points.
Cheers
SH
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Download |
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BNF Delta hedging trade book.xlsx |
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skaz
White Belt
Joined: 30 Jul 2014
Posts: 14
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| Post: #342 Posted: Fri Jul 28, 2017 4:20 pm Post subject: |
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Good observation by ST. Not only sudden drop in volatility and movement against your trend or position. But even sudden jump in volatility will also kill such trade. Once volatility jump shorted option start multiplying where in long option goes in the money and does not move in same proportion. in such cases loosing trade looses much compare to gain made. Hence it cannot be termed as risk free delta neutral. there is always a risk in trading and this is not risk free either. 
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Alchemist
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| Post: #343 Posted: Fri Jul 28, 2017 5:26 pm Post subject: |
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| Excellent analysis - hats off to skaz sir !
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SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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| Post: #344 Posted: Fri Jul 28, 2017 7:28 pm Post subject: |
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| skaz wrote: | | Good observation by ST. Not only sudden drop in volatility and movement against your trend or position. But even sudden jump in volatility will also kill such trade. Once volatility jump shorted option start multiplying where in long option goes in the money and does not move in same proportion. in such cases loosing trade looses much compare to gain made. Hence it cannot be termed as risk free delta neutral. there is always a risk in trading and this is not risk free either. |
Very true skaz, right on target.
This is a good thread though. The ideas are good, implementation has to be skillful. I hope followers of this thread do stick and see how trades are handled during volatile times, that will be the key in long term success of this strategy.
Good Luck SH!!!
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Srikanth Kurdukar
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skaz
White Belt
Joined: 30 Jul 2014
Posts: 14
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| Post: #345 Posted: Fri Jul 28, 2017 7:34 pm Post subject: |
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The only way one can trade such system is when one is capable of identifying post volatility explosion exit or adjustment , special event like breaking 52 weeks high low, breaking all time high low , suddenly developed special event, rapid OTM option changes in anticipation of future special event etc etc....
Yet it is possible to monitor and trade such set up. But when it happens one has to jump out of the window or run like chicken for trade adjustment .
however if not it is extremely risky trade and risk/ reward is not favourable at all. But if one can manage he can make money. In my individual opinion it is high risk/ high probability and low profit set up trading system. Some example I can share of above situation if you want.
cheers and happy weekend.
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