Re: [SuperTraderKarenStudy] Re: A Natural Hedge


Feb 23, 2016

 


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#6453 Feb 23, 2016

I know many of you watch tastytrade.�� I thought this was a very interesting segment on yesterday's From Theory to Practice.��



A Natural Hedge

��

�� �� �� �� �� ��

A Natural HedgeThe inverse relationship between prices and volatility makes short delta a perfect complement to a portfolio that is short premium.



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#6457 Feb 23, 2016

Hello Bobby,

The initial Karen style set up is Delta neutral.�� If you wanted to be Delta negative you could sell equal numbers of calls and puts.

Then the market moves and things get out of balance.�� Part of the management involved with Karen style trading is dealing with the market moves.

Tom



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#6458 Feb 23, 2016

I do not watch the greeks, so not much help.



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#6459 Feb 23, 2016

Tom,��

So selling two outs to one call will be delta neutral? ��I was thinking that would have a positive delta. ��I guess it's because the puts are farther out of the money so it makes it neutral? ��I just want to understand.

Thanks,

Bobby

Sent from my iPhone

On Feb 23, 2016, at 7:59 PM, poast@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:



��Hello Bobby,

The initial Karen style set up is Delta neutral.�� If you wanted to be Delta negative you could sell equal numbers of calls and puts.

Then the market moves and things get out of balance.�� Part of the management involved with Karen style trading is dealing with the market moves.

Tom



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#6460 Feb 23, 2016

Hello Bobby,

That is correct.�� The puts are further away from the money.�� If you sell 2 of the roughly Delta 5 puts you end up with a positive Delta of 10.�� Selling 1 of the Delta 10 calls gives you negative 10 Delta.�� + 10 - 10 when added together = 0.

Tom



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