Interesting perspective… I’d never thought about delta-hedging as recreating a synthetic option, but of course, that’s what you’re doing. You then end up keeping the “spread” between the premium you paid and the actual cost of delta hedging, which is how you’d get paid for (or purchase) vega. Def cool.
Wait a minute…Ohai, are you Sheldon Natenberg??? j/k
bchadwick Wrote: ------------------------------------------------------- > Interesting perspective… I’d never thought about > delta-hedging as recreating a synthetic option, > but of course, that’s what you’re doing. You then > end up keeping the “spread” between the premium > you paid and the actual cost of delta hedging, > which is how you’d get paid for (or purchase) > vega. > > Def cool. You can think in terms of risk sets as well: option = (delta, vega, gamma, theta, …) delta_hedge = (-delta) option + delta_hedge = (vega, gamma, theta, …)
CardShark Wrote: ------------------------------------------------------- > Wait a minute…Ohai, are you Sheldon > Natenberg??? j/k Is Options Volatility & Pricing still considered the “bible” for those in the business of making a market in options? JH still teaching the newbies in Chicago? I spent 5 years with a top prop options arbitrage firm and happy to answer any question about that business (though I am 6-7 years removed from it so I could be forgetting things!). Justin mainly described the main aspect of what I was involved with. It’s basically about buying below theoretical value and selling above it and then managing all the risks by neutralizing “the Greeks.”