Delta Hedging Explained: Options Trading Strategies
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- čas přidán 4. 06. 2024
- Unlock the secrets of delta hedging with our comprehensive guide on options trading strategies. Discover how delta impacts option Greeks, and learn the difference between positive and negative delta to optimize your hedging techniques. Explore the dynamics of delta changes over time and with stock price fluctuations, and compare static versus dynamic hedging approaches. Gain practical insights with a detailed example of dynamic delta hedging, perfect for both novice and experienced traders looking to achieve delta neutral portfolios.
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Chapters:
0:00 - Intro to Delta in Option Greeks
0:57 - Hedging: Positive Vs Negative Delta
2:22 - Option Price Change Based on Delta
3:03 - What is Delta Hedging?
3:57 - Delta Neutral Portfolios Explained
5:29 - Delta Changes Over Time
7:43 - Delta Changes With Stock Price
9:01 - Static Hedging Vs Dynamic Hedging
10:22 - Dynamic Delta Hedging Example
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
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Hey Ryan amazing explanation. just a quick question..in your example of dynamic hedging, as delta changes across different time periods (i.e week 1 & 2 where stock price fell) and you sold 6.4k + 5.8k stocks at a lower price. These are realized losses that the investor has to absorb right? The investor would NOT make back these losses through the delta hedge right?
Any losses in the short shares should be offset by the gains in the long calls and vice versa! (This assumes the hedge is perfect and the portfolio is delta neutral which we are assuming in this simplified example)
Hello Ryan thank you very much for your contributions! I am about to work as a credit risk analyst for an investment banking. According to you, this job experience could be valuable in the future for a job as a fixed income trader? Cheers from France
It is my pleasure Lova! In my opinion, that would be a great role to use as a stepping stone to become a fixed income trader. You would most likely learn the majority of the prerequisite knowledge required. Good luck with the new job!
This should be good for L3 derivatives..Thanks Ryan
Absolutely! It is my pleasure. Are you on Level 3 right now?
@@RyanOConnellCFA Yessir! Registered for August. At this point I just wanna get it over with, lost all the enthusiasm I had when doing L1 and L2 🤣.
@@pizzaandmeth4538 Please keep me updated on how it goes! I know that burnout feeling lol. Goodluck!
@@RyanOConnellCFA Will do Ryan..Pushing through 💪🏼.
@@pizzaandmeth4538 You got this!
No perderias dinero cada vez que el precio baja? Basicamente comoras acciones si sube y vendes si baja (lo contrsrio a la logica). La prima recibida por el shot call comoensa ests cobertura?
Hola @tanoalcanoni, ¡gracias por tu pregunta! No hablo español, así que estoy usando una aplicación de traducción y algunos conceptos podrían no expresarse perfectamente. En la estrategia de delta hedging, el objetivo es reducir el riesgo ajustando continuamente la posición en acciones para compensar los cambios en el precio de la opción. No se trata de ganar dinero con los movimientos del mercado, sino de neutralizarlos. La prima recibida por la venta de la opción call (short call) puede ayudar a compensar cualquier pérdida en la cobertura, pero el éxito de esta estrategia depende de gestionar adecuadamente el equilibrio entre la opción y la posición en acciones para mantener la neutralidad delta.
@@RyanOConnellCFA Muchísimas gracias por tu respuesta! Voy a seguir viendo tus videos para aprender mejor toda la parte operativa. Saludos
¡Gracias a ti, @tanoalcanoni! Me alegra saber que los videos te son útiles. ¡Saludos!