May 21, 2017 at 11:13 pm #7980May 21, 2017 at 11:13 pm #7978
– I have been following all your trades over the last 7 months backtesting in an options platform at an assumed maximum risk level per trade.
– First – can I congratulate you on an excellent profit performance. I am very surprised Steve doesn’t publish your financial performance on the IWO site – it kills a lot of other sites that I have checked out!
– Secondly – a question on Delta hedges such as the ones used on this trade as well as the SPX 06JAN17 Iron Condor placed on 15Nov16:
– Could you help me with some clear guidelines on the rules that you use to determine the size and strike level of the hedges that you use?
– I have been a bit confused as you often mention the size of the hedge – but not the size of the initial trade. I have gone through the Iron Condor Intensive course – but I am still not clear.
– A bit of stress testing points to the fact that the size of the hedge is key in determining whether the whole trade ends up in a profit or loss. Based on size it can be substantial either way.
– Please keep up the good work – I have gained a lot by following you closely.
– Many thanksMay 22, 2017 at 4:48 pm #7979
Graham, thanks for your feedback. In this video, I went over the basics of using OTM options as a hedge:May 23, 2017 at 8:21 am #7981
Igor – much appreciated – it was great – a nice easy to follow video – on an adjustment system with nice clear rules.
A question on detail:
– If say you have too much negative Delta – and you want to add say 30 Delta to your position – as per your adjustment system you would go and purchase OTM Calls with Deltas adding up to 30 – ie 3 x 10 or 2 x 15.
– However – the shape of the Risk Curve of a Call changes – based on how far OTM the Call is.
– With Price change in the Underlying – a Call at OTM 10 will behave differently to a Call at 15 OTM.
– Do you have any approach or guidelines that would address this issue?
– Many thanksMay 23, 2017 at 10:20 am #7982
To remove excess delta I will go out to options that have around 45 days to expiration and use OTM options to achieve that. I like using options that have delta between 15-8 because options that are closer to ATM (40-30 delta) don’t have as much gamma and don’t lift the curve as much as I’d like on the upside, and options that are very far OTM (less than 5 delta) don’t gain as much value as the pricing model suggests and therefore don’t cover the cost of a roll.May 23, 2017 at 8:50 pm #7991
– An EXCELLENT response – sound and logical.
– I checked this out on my option software – it’s a really good approach.
– Many thanks
– I will keep following you with great interest.May 23, 2017 at 9:12 pm #7992
I’m really glad you’re following the process and learning at the same time. I hope everyone else is doing the same and I encourage everyone to ask questions because my goal is to help traders become profitable and consistent with their trading.May 23, 2017 at 9:16 pm #7993
– Just what I needed!
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