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The only way you profit from delta neutral trading is either from a change
in volatility or simply a very large move, but it really depends on how
you get delta neutral. You could get delta neutral by selling a straddle..
then you benefit if volatility(actual vs implied)is lower than expected.
A delta neutral backspread(say a 1 x 2 spread)would profit from a big move
in the market. So your answer really depends on how you get delta
neutral.
<P>Olukunmi Popoola wrote:
<BLOCKQUOTE TYPE=CITE> <FONT COLOR="#000000"><FONT SIZE=-1>Hi there,</FONT></FONT><FONT COLOR="#000000"><FONT SIZE=-1>Please
can anyone explain, preferably with examples, how one can profit from delta
neutral trading.</FONT></FONT><FONT COLOR="#000000"><FONT SIZE=-1>POP</FONT></FONT> </BLOCKQUOTE>
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</x-html>From ???@??? Tue Apr 07 15:50:13 1998
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Date: Tue, 7 Apr 1998 17:05:48 -0500
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From: "Proeber, Tim" <TProeber@xxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: RE: Option trading: Delta Neutral ...Married Puts?????????
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Where have you seen it?
At what time do you unload the put leg of the straddle? Or do you eat
the premium? If just a married put was used with a long Bean futures
contract, how far out, months wise, and how much in/out/at the money do
you by?
I'm dying to know the answer to the married put question
THANKS !!!!!!!!
Tim Proeber
tproeber@xxxxxxxxxx
> -----Original Message-----
> From: Tim and Lynn Lee [SMTP:Timothy.H.Lee-1@xxxxxxxxxx]
> Sent: Tuesday, April 07, 1998 4:38 PM
> To: RealTraders Discussion Group
> Subject: Option trading: Delta Neutral what the experts don't
> tell you...
>
> RT's
>
> What have I learned from watching the best option traders around?
> These are real floor traders
> Not the magazine guys, who admittedly are somewhat sound in their
> ideas.
>
> A nice delta neutral trade which might be done now is the following:
> buy September bean straddles or strangles the volatility on these
> options has been dropping lately.
>
> You then have a position in which you need movement in the futures or
> underlying. You do really not
> Care whether the movement is up or down so long as it moves. As the
> futures move the delta on your position
> Increases or decreases you then need to buy or sell futures to keep
> the trade delta neutral. What you are hoping for might be the
> following scenario: beans tank. You have to buy futures to keep your
> position neutral.
> Well then what might happen ? A drought then as the underlying
> explodes upward you are getting longer and longer as the position goes
> up, you then sell out everything for a small fortune.
>
> I have seen this type of thing work many times.
>
> Floor Trader
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