Delta Calculatin

How to calculate Delta?
Now, Nifty @ 5080.
5100 CE @ 75/-
5100 PE @ 85/-.
from this How to profit Using Delta ?

Delta is the rate of change of option price w.r.t. the underlying. So it's a 1st order derivative.

Crudely speaking, say, Nifty has moved by +100 points from 5100 to 5200 and 5100 CE has moved 70 points in the mean time, delta is 0.70 for 5100 CE where as 5100 PE will have delta as -0.30. So the sum of the absolute values of delta pairs of same strike should be always equal to 1.
But the value of delta of each strike price changes with the change in price of the underlying.

Generally, the trading platforms like ODIN or NOW provides calculation of greeks (delta, theta, vega, etc) for each and every option. For NOW, press F5 to find the implied volatility of that option.

Option Oracle calculates greeks w.r.t. the value of the underlying. But I have found that the value of the futures are more useful in calculating greeks.


Hope it helps. :thumb:

I have set up a nifty short strangle today
5100C @ 70.30
4900P @ 30.80
Break even is at 5200.
How does one hedge this position?
Buy nifty Future @ 5200 ?
Or follow delta neutral srategy?
If it is latter, how does one do it?
could you help please?
Thanks,
gmt900

Thanks!
I have downloaded the oracle software, but am not sure about how to use the info on delta.
gmt900

Hi Gmt,

the 3 most important things about options are time to expiry, strike price selection(as well as price of underlying) and volatility. When we do short a delta neutral strategy, we expect the market to move in a range to kill the theta value of options, thereby profiting from it... This strategy works well few days before expiry except in those expiry dates when market moves unidirectional with great velocity (e.g.- February 2011 expiry).

In your case, the range you have selected is 4900 to 5100. You would start losing if market stays below 4800 or above 5200 on expiry... Currently, the value of the strangle is around 128. If I were you, I would have gone long above 5100 and short below 4900 and book profits at regular intervals.
Linkon has a thread on this strategy where he does the same but at the mid-point mark i.e. 5000... Choose your poison... There is nothing called risk-less profit in trading... even arbitrage has its own disadvantages... so is hedging...

Thanks PGDIMES for your advice. I will keep track of nifty and go long on NFabove 5200 and go short below 4800. I suppose I will have to square the position in case nifty moves back in the opposite direction. i.e. again goes below 5200 or comes above 4800.
Thanks again,
gmt900

Re: Delta Calculation

Dear friends,
Today(03.10.2011) @ 2.40 PM details below,
Nifty: 4850.
Nifty 5000 CE: Rs: 90/-
Nifty 4700 PE: Rs:110/- .
from this , I guess more bets on PUT side. so market may down. The diff. is exactly 150 points. so, Im easily guess it.
If the nifty move to some other points, 4870, 4880, then how to guess it?
or how to use the delta, greeks to predict the market?