8 replies to this topic

[NAV]

Happens once or twice a year. Rest of the times, boyz take home the money. You do the math on the odds. BTW, NDX failed to make new lows today. And DOW is back into the channel.

Edited by NAV, 15 October 2007 - 03:11 PM.

[gismeu]

Happens once or twice a year. Rest of the times, boyz take home the money. You do the math on the odds.


BTW, NDX failed to make new lows today. The divergence was telling. And DOW is back into the channel.

NAV,

could you elaborate please? No compute what you are talking about!

thanks, gis

[NAV]

Happens once or twice a year. Rest of the times, boyz take home the money. You do the math on the odds.


BTW, NDX failed to make new lows today. The divergence was telling. And DOW is back into the channel.

NAV,

could you elaborate please? No compute what you are talking about!

thanks, gis

gis,

Delta hedging is an options strategy wherein the seller of the options tries to reduce his risk by offsetting his options positions with stocks. Of course a buyer of the options could also be delta neutral.

Anyway there comes a scenario where a seller of puts is hedged with short stocks. Now if the market starts a sharp decline, the puts seller needs to sell more stock to remain delta neutral. That selling further exacerbates the market decline, which becomes a vicious spiral of more heding resulting in more decline, which is called delta hege metldown.

[denleo]

When I am short puts, I never hedge. Bernanke and Paulson will do the job. Denleo

[NAV]

When I am short puts, I never hedge. Bernanke and Paulson will do the job.

Denleo

There you go.

[Pabst]

Conversely much of the rally this past month was caused by put sellers buying back hedges as the deltas on those puts were decimated.

[dowdeva]

Happens once or twice a year. Rest of the times, boyz take home the money. You do the math on the odds.


BTW, NDX failed to make new lows today. The divergence was telling. And DOW is back into the channel.

NAV,

could you elaborate please? No compute what you are talking about!

thanks, gis

gis,

Delta hedging is an options strategy wherein the seller of the options tries to reduce his risk by offsetting his options positions with stocks. Of course a buyer of the options could also be delta neutral.

Anyway there comes a scenario where a seller of puts is hedged with short stocks. Now if the market starts a sharp decline, the puts seller needs to sell more stock to remain delta neutral. That selling further exacerbates the market decline, which becomes a vicious spiral of more heding resulting in more decline, which is called delta hege metldown.

Nav,

Would you mind explaining what it means that the buyer could be delta neutral and also, does it shift this spiraling process in some way? Also, don't mean to test your patience, but 'rest of the time, the boyz take home the money?'

TIA

Deva

Ps: Didn't get stopped out on my BIDU yet...

Edited by dowdeva, 15 October 2007 - 04:43 PM.

[arbman]

delta neutral

[NAV]

Happens once or twice a year. Rest of the times, boyz take home the money. You do the math on the odds.


BTW, NDX failed to make new lows today. The divergence was telling. And DOW is back into the channel.

NAV,

could you elaborate please? No compute what you are talking about!

thanks, gis

gis,

Delta hedging is an options strategy wherein the seller of the options tries to reduce his risk by offsetting his options positions with stocks. Of course a buyer of the options could also be delta neutral.

Anyway there comes a scenario where a seller of puts is hedged with short stocks. Now if the market starts a sharp decline, the puts seller needs to sell more stock to remain delta neutral. That selling further exacerbates the market decline, which becomes a vicious spiral of more heding resulting in more decline, which is called delta hege metldown.

Nav,

Would you mind explaining what it means that the buyer could be delta neutral and also, does it shift this spiraling process in some way? Also, don't mean to test your patience, but 'rest of the time, the boyz take home the money?'

TIA

Deva

Ps: Didn't get stopped out on my BIDU yet...

DOWDeva,

Buyers may or may not be delta neutral as most option buyers are either speculators or hedgers, unless one is doing some kind of a delta neutral strategy.

"The rest of the times boyz take the money" - I mean't barring a delta hedge meltdown, the resolution into OPEX is most of times upwards.

Edited by NAV, 15 October 2007 - 08:32 PM.