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Just a question:
A few moons ago I was guest on the George Fontanills show and his
explanation of Delta Neutral made it all sound very sexy indeed, but I never
really got an answer on how the margining of the postion worked -
particularly if it did not go your way to start with? It seemed to me that
you needed a lot of capital to hold your position.
Could you give an example in the Bonds, which is what I trade?
Many thanks
Bill Eykyn
-----Original Message-----
From: Tim and Lynn Lee <Timothy.H.Lee-1@xxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Tuesday, April 07, 1998 10:47 pm
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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