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Hi Joel -
At one point I spent some serious time really looking into the Delta Neutral
strategy.
On the surface it looks like a conservative and tremendous way to make money
and be correct maybe 80-90% of the time.
However...I call it the "wash" rule. Every strategy out there is a wash
(break-even or loss) unless you have some kind of edge over the majority.
Just doing delta neutrals is not an edge. What happens is that you make
money...small amounts over and over until the markets become unglued and you
get slammed for everything you've made and more.
You are in the market most of the time...very vulnerable for the big slam.
This strategy is almost the opposite of the Turtle's trending plan whereas
they are right maybe 33% of the time, but make big profits on the winners.
I know of actual traders who put their money under the management of these
"bookie" firms and took big losses in the end.
I would suggest looking at it, but then try to find an edge ...or it's gonna
be a disappointment. IE, if you are focusing on these kind of trendless
markets, find a method that forecasts one coming up.
I can think of a good start: Look for a sharp run up or decline on a daily
or weekly chart. The majority will be looking for a continued rise or sharp
decline...but NOT a consolidation. That the time to sell a Delta
Neutral...when the premiums are high and the majority are battling it out in
a price range that can last up to a month or more.
You don't want to sell one in a quiet creeping market when premiums are low
and surprises can kick your ass.
Good luck -
Tom Cathey
Chow -
Tom Cathey
-----Original Message-----
From: Joel Reymont <joelr@xxxxxxxxxx>
To: Omega <omega-list@xxxxxxxxxx>
Date: Saturday, April 10, 1999 6:57 PM
Subject: Delta Neutral trading & George Fontanills
>Is anybody using delta-neutral strategies in their trading?
>Any opinion on Georga Fontanills and his course on above?
>
> Thanks in advance, Joel
>
>
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