30% returns with Delta hedging options

[myamit]

I do not intend to be patronizing. Am just trying to present a logical point of view.

See, I am an ordinary man; just a one man army. If I could earn 30% a month without seeing any loss, then imagine what a corporation could do! Corporations, with massive computers, with geniuses on their pay-rolls. They'd saturate that concept in matter of seconds.

Point is. In the stock market, there is always a loss, and most definitely there is always a draw-down. Theoretically, one could argue that if delta gets adjusted then all is fine... but theory is only the first step into reality.

A suggestion: If you do not have 10 to 15 years of hardcore experience in the stock markets, then do not go for advanced methods of deploying cash. Markets will wolf it down in a matter of days. Save this money.

I fully agree with your viewpoint.

However what you have missed is that 30% is per annum (yearly) and not monthly. Hope now all will be easy and clear

Regards,

 

[jamit_05]

I fully agree with your viewpoint.

However what you have missed is that 30% is per annum (yearly) and not monthly. Hope now all will be easy and clear

Regards,

LOL Yes. 2.5% a month is much better on the eyes!

Hope you also meet the criteria for trading advanced methods.

PS: LOL... Sorry for assuming too much

 

[myamit]

My position today... taken at 3:25 pm

200 x Short PE 5000 (Dec-14) @ 86
100 x Short CE 7500 (Dec-14) @ 170

Delta for this position is under my tolerance level.

Now I'll readjust this position either on Friday or after 200 points move in Nifty.

Regards,

 

[Somatung]

You forgot to post the prices of your option

 

[bpr]

@myamit

chk this out. you might want to do gamma neutral as wll as delta neutal
even then you don't have any control on vega and it can spoil the game
good luck.
http://www.investopedia.com/articles/optioninvestor/07/gamm_delta_neutral.asp

 

[Taurus1]

I believe that by delta hedging, I'm controlling my price fluctuation risk and will earn time decay. This will result into much higher % return.

Since the timeframe was not clearly defined, there was no way to evaluate it.

200 x Short PE 5000 (Dec-14)
100 x Short CE 7500 (Dec-14)

Any option sale >3 months with low delta has small time decay. It's more dependent on volatility than theta.
I posted a link on my thread to an interview video of a trader who sells delta5 strangles. Maybe worth watching.

 

[gmt900]

My position today... taken at 3:25 pm

200 x Short PE 5000 (Dec-14)
100 x Short CE 7500 (Dec-14)

Delta for this position is under my tolerance level.

Now I'll readjust this position either on Friday or after 200 points move in Nifty.

Regards,

You have shorted four lots of PE and two lots of CE. Is it to make the trade delta neutral?

 

[comm4300]

My position today... taken at 3:25 pm

200 x Short PE 5000 (Dec-14)
100 x Short CE 7500 (Dec-14)

Delta for this position is under my tolerance level.

Now I'll readjust this position either on Friday or after 200 points move in Nifty.

Regards,

thank you for posting your view and trade.

with elections around the corner, VIX likely to spike up (my guess)...couldn't you have waited till April to earn more premium?

what will be your plan of action if VIX rises and the premiums of both the legs increase.

thanks.

 

[comm4300]

Since the timeframe was not clearly defined, there was no way to evaluate it.

Any option sale >3 months with low delta has small time decay. It's more dependent on volatility than theta.
I posted a link on my thread to an interview video of a trader who sells delta5 strangles. Maybe worth watching.

can't find the link...can you please repost it.

thanks.

 

[myamit]

Thank you for all your posts. Below are replies...

@ Somatung : Thank you. I've added prices to that post now.

@ bpr : I'll check your link. However purpose here is to keep things simple and see whether only delta can make us some money or not.

@ Taurus1 : Timeframe is clearly defined as Dec-14 series. I may start existing slowly from Oct-14 onwards.

Could you please share link to your thread & video. Thanks.

@ gmt900 : Yes four & two lots combination is to make trade delta neutral.

@ comm4300 : you may be correct for getting better premium on account of higher vix. However this effort is not maximizing (or optimizing) earnings. I'm simply trying to see whether Delta neutral things works or not. Also have I understood it correctly?
What you're saying may be the next step.