delta heding

jimmy1852

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guys & girls,

can anyone point me in the direction of any particularly useful/informative threads from the past on calculating delta hedges with OTM, ATM and ITM strategies of varying difficulty/complexity (obviously assuming the component leg deltas are known)?

i dont have any trouble working out the net delta of something like a an OTM short straddle, but i am a little lost when it comes to (for example) working out the net delta on different butterfly and condor strategies. simply, is there a particular formula or method for calculating net delta for any kind of strategy, whether it be OTM, ATM or ITM?

im a little worried i haven't explained myself adequately here?!

thanks in advance
jim
 
Sum the delta of each individual option contract (puts have a negative delta remember)

thanks DB,

i realise that was a pretty rudimentary question. i just got an example the other day that threw me. im guessing i just made miscalculation along the way

cheers,
 
calculating the delta

jim,

To calcute the delta of your strategies you must use a model. (e.g. CRR)
Than when using it you must set the "correct" volatility per strike.
If you have done that (there are a variety of calculators online) you can add the delta per option to come to a net delta of your strategy.

Goodluck.

Don't forget to include dividends. (if there any, you must use discrete div models, not continious yield models)

AJJ
 
be aware of assumptions when you're using models....perfect market, constant vol etc.
 
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