re: Options Trading Thread

Ever consider delta hedging?

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Ever consider delta hedging?

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Do you mean incorporating S&P futures or using offsetting options? I haven’t used futures, but I typically construct my 1DTE synthetic strangles as delta neutral trades (same with my 45+/- DTE ICs). The 6/2 debacle with the 1DTE strangles was caused by my own greed colliding with a fast moving market. While the put sides evaporated fairly quickly on Friday, the call sides exploded and gamma began biting hard.

But let’s say for a typical shorter term IC or syn. strangle, could you describe the type of delta hedging that’s worked for you? And since Friday was an atypical move, I understand that it might not work in situations like that.

Thanks.

Guy lost $750k in one day selling naked calls.

r/thetagang

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Yeah I was referring to futures or whatever underlying

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Although I’ve had futures trading approval for years, that’s an area that I haven’t delved into. Perhaps later on. But for what you mentioned, it might be possible to accomplish this delta hedging by using SPY shares against SPX options positions? With the tight correlation, at least on longer dated trades, perhaps. Because I tend to trade some size on SPX options (10-20 short options per side typically) on the <3DTE trades, I use the S&P market index as an underlying instead of SPY for commission/fee reasons (I’d be trading 10x the number of SPY options per trade). Using SPY shares to hedge, I don’t believe there would be any trading fees on TOS, but I’d have to confirm that.

But one thing about these short dated SPX option trades (even those that are opened as delta neutral), about the only way to realistically manage them is to decide when/if to close if there’s an unexpected violent directional move in the market. That’s what I had to do on Friday. I hadn’t suffered a loss in my SPX trades since March 3 of this year, so “sequence of returns” was bound to send the Doberman after me at some point. Just part of the game we play. Not pleased (of course), but not crippling either - just a minor setback on the P&L.

I think he totally lied about losing that amount. Instead he just withdrew the money to pay taxes.

Why people feel the need to lie about such things is beyond me.

Ah, got it now. Guessing he’s one of those keyboard superhero types.

For naked calls to get that far out of hand (for anything but a $10 mil + account), even with Friday’s monster move, a trader would have to be completely asleep at the wheel.

After the down turn, I was able to buy back sold calls with about 80% profit.


Waiting on the next up turn this week to sell them again!

I had some $15 pltr calls 6/09 that I sold for 180% when it hit $17 today.

Just grabbed some $17 6/16 calls for .20 each.

ETA… Added a couple more at .18

Update: been working with the 0DTE's IC instead of 1DTE incase of overnight news. so far I'm 7-1 wins losses.. the one loss was very large and has wiped out my gains.. I need to learn that when the market wants to rip, it'll rip and I need to get out.

Have you posted your deltas and time table for the trade?

What do you look for?