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>Date: Tue, 25 Aug 1998 12:30:45 -0500
>To: Scott Hoffman <trader20@xxxxxxxxxxxxxx>
>From: Stewart Taylor <staylor@xxxxxxx>
>Subject: Re: Delta neutral option strategies
>
>
>>You commonly hear that short neutral spreads work about 80% of the time,
but you can get killed on the big unexpected move. (Case in point,
Neiderhoffer) This is compounded by spikes in implied volatility as well as
the speed at which the position becomes unbalanced (gamma).
>
>I ran delta neutral positions (cross hedging MBS portfolios and mortgage
banking pipelines against bond and note options). I always left a bunch of
short option positions sitting around but I always always always had a plan
in place to defend the position. I have never made very much money in long
delta neutral positions (except as a directional call against an
underlying). To much time and vol. exposure.
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/
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