delta heding

[jimmy1852]

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

 

[A Dashing Blade]

Sum the delta of each individual option contract (puts have a negative delta remember)

 

[jimmy1852]

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,

 

[AJJ]

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

 

[gooseman]

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