30% returns with Delta hedging options

[gmt900]

10-Mar-2014

Sold seven lot of PE 5000 @ 65.5
Sold two lot of CE 7500 @ 225

Now position is

650 x Short PE 5000 (Dec-14) @ 72.45 (Avg price)
200 x Short CE 7500 (Dec-14) @ 197.5 (Avg price)

Premium earned : 86595
Current premium : 87575
Notional loss : 1020

Capital employed (approx.) : Rs. 4.25 Lac

You have received 1.04 Lac premium too. So Capital employed is 3.21 Lac, right?

What was the idea behind choosing month of Dec 2014 for the strategy?

I mean , since you are regularly taking action to adjust delta to keep it neutral, even say June 2014 could have been considered.

By the way, no option prices are quoted for Sept 2014.

 

[jagdish_gupta6]

Hello amit ,

Are you still trading in option ? if yes still you are doing delta adjustment ?

Jagdish Gupta

 

[sanjeev258380]

==========
11-Mar-2014
==========

Sold two lots of PE 5000 @ 68.5
Sold one lot of CE 7500 @ 216

Now position is

750 x Short PE 5000 (Dec-14) @ 71.92 (Avg price)
250 x Short CE 7500 (Dec-14) @ 201.2 (Avg price)

Premium earned : 104242
Current premium : 104225
Notional profit : 17

Capital employed (approx.) : Rs. 4.99 Lac

With 5 lakh..u playing with vega.. india vix..and nifty... wat if 2 down or up ckts..during election tym... ur all money will be furr in one day..there are more streatgies there to play..with this much some money.....Think about it..
i pray to god.. this all in paper trades..

 

[jamit_05]

[/U][/B]


You have received 1.04 Lac premium too. So Capital employed is 3.21 Lac, right?

What was the idea behind choosing month of Dec 2014 for the strategy?

I mean , since you are regularly taking action to adjust delta to keep it neutral, even say June 2014 could have been considered.

By the way, no option prices are quoted for Sept 2014.

It is a proper thing to say. It doesn't make sense to take unlimited risk for a mediocre returns. If ones intention is to gain 2% a month, then the risk too must be commensurate.

 

[myamit]

Friends,

Thank you for your concerns. Let me clear that this is paper trade and I'm just trying to execute one of my thought. In my first post itself, I've asked expert opinion and reasons that why & when this can go wrong?

I'll continue to follow this for a while till I reach to some solid conclusion.

Regards,

 

[Options Trading]

how do you measure Deltas? do you have any tool ?

Options oracle has stopped working again !!!

 

[abcpankaj]

one can calculate delta & other greeks at http://www.option-price.com/

 

[msa5678]

Options oracle was very useful
for calculation of Greeks. Don't
know why these fellows at NSE
had to change the looks of their
site.

There are lot of option calculators
available on the net, but the variables
needed to be input are very confusing.
For example Interest rate = ? ( I am using 10%)
Dividend Yield = ? ( I don't know)
Volaitlity = ? ( I am using from NSE Option Chain Data)

Option Gurus, is the above correct ?

 

[Somatung]

Options oracle was very useful
for calculation of Greeks. Don't
know why these fellows at NSE
had to change the looks of their
site.

There are lot of option calculators
available on the net, but the variables
needed to be input are very confusing.
For example Interest rate = ? ( I am using 10%)
Dividend Yield = ? ( I don't know)
Volaitlity = ? ( I am using from NSE Option Chain Data)

Option Gurus, is the above correct ?

If you understand Delta in details, you are able to use common sense to value where about your delta of any position around is.

Interest rate: India Government Bonds
Dividend Yield: Make it a three, as this has not much influence of the outcome of the result at the moment
Vola: NSE fine or what the stock shows you use as underlying.

Somatung

 

[mukuldunnu]

Dear Augubhai,

I understand what you're saying. However I want to keep this as simple as possible. I'm okay with PE 5000 and CE 7500.

All what I want to know is there any chance to loose money if I keep correcting delta on regular basis?

What should be the frequency (time & certain volatility)

Am I making any big mistake in hedging delta only? If yes, what?

Regards,

Mukul Sharma


No I don't think that there is any chance of loosing money but due to low

theta result can be late so please consider interest on margin . and also as I

think u should consider only delta neutral neither it will become complicated

and so many positions which is not necessary at these levels of Nifty

Thanks

Mukul Sharma