wow, this is probably the most insightful options hedging video i've seen. subscribed!
@makeittrades57502 жыл бұрын
This is gold! Thank you for posting this.
@levteck2 жыл бұрын
This is good info but represents only one side of the equation. The full picture for any MM is neutralizing calls AND puts not just calls. When the open interests of the calls and the puts are un-equal ATM and or shifted across strike prices this becomes a very interesting exercise for the MMs.
@quincygunnerson56704 жыл бұрын
Damn this helped me visualize and understand it very wel
@arshiaa84744 жыл бұрын
thank you.
@kaiwang2924 Жыл бұрын
Crystal clear
@aaronoconnor4794 Жыл бұрын
Why do you think the majority of trading is automated? Mm delta hedging. MMs don't take losses, they simply adjust long/short exposure tick by tick to account for their short p/c positions. Every high p/c environment ends in a short term spike eod while mm cover hedges as contracts close/expire
@Hellya382 жыл бұрын
just wonder in what type of market movement would MM start to hedge their written calls with futures (eg. ES for SP500) vs SPY ETF shares for index types operation?
@MitchRichard655 жыл бұрын
If only SellerOptions's James Cordier had seen your video beforehand....
@ihtfp0044 жыл бұрын
Mitch Richard Cordier had no hedging in his hedge fund.
@xxrngxx53 жыл бұрын
Here to make more sense of the Gamma squeeze on $GME haha
@angstrom1023 жыл бұрын
Excellent!!! How does a change in IVol affect these calculations?
@dallin_stagg3 жыл бұрын
I’m still learning so forgive me if my question is overly basic. When the stock price moves wouldn’t delta change so we’re no longer perfectly delta hedged? Does delta actually have a $0 impact or are you implying that the delta at the original point is hedged and the new delta created through gamma is the expense in the gamma column?
@MacGuffin12343 жыл бұрын
Yes, Market Maker will have to re-hedge their position, they can adjust day by day or week by week so long as they're in a comfortable zone of delta
@aprilmaykestradez45432 жыл бұрын
Thank you so much for the visuals and breakdown! I have just started my studies in this area, and was wondering what the difference would be using the binomial pricing model, and could you also please explain the significance to MMs of 1 Delta? From what I have found thus far it appears to be the future price of the underlying. Awesome job, David, and thanks again!
@yshaool2 жыл бұрын
When the price moves up or down the Delta changes (of that specific call). If that is the case, wouldn't you say that the MM needs to keep adjusting its hedge for every $1 stock move? For example, if the stock moves up $1 and Delta went up too, they need to buy more stocks. If the price went down $1 the delta went down and they can sell the change back to the market.
@bmwman55 жыл бұрын
Another good one David. Thank you.
@bionicturtle5 жыл бұрын
Thank you for the support!
@Dylan-zl4uk3 жыл бұрын
how can MM hedge against whipsaw movement ? seem like MM can only hedge one direction but when the Underlying reverse creating a whipsaw movement . the MM is out of luck. Or is there a way MM can hedge when the underlying make a u-turn? my best guess is they dumping the shares so they can be delta neutral again? But when will they dump the shares? at what trigger point?
@miguel.gargicevich4 жыл бұрын
So taking this year last few months, with the high volatiliy of tech stocks , is it fair to assume that the MM were probably making loses?
@George-om1te2 жыл бұрын
Compensated by Vega?
@olvinfuentes75142 жыл бұрын
10:30 very cool indeed
@nickjackson9123 жыл бұрын
Do MM always hedge? Or do they keep track of winning and losing traders? I see Unusual options activity all the time but MM hedge only a small percentage of them. Why would that be?
@ScottAllenFinance2 жыл бұрын
"MM hedge only a small percentage of them" - how do you know this? "Unusual activity" on a particular strike may be partially hedged by the contracts on the other side of the option chain, i.e. puts if the UA is on calls. It is one massive, dynamic system that encompasses many inputs and outputs including the moneyness/delta of the strike. OTM contracts hedged less due to lower delta, etc.
@TaoDeChing-ls5gz Жыл бұрын
I thought gamma is greatest closest to the money, why is it then the MM delta increase as the stock price moves further from the money??
@ByomakeshDebata14 күн бұрын
The Excel spreadsheet with the link provided is not available. Could you help where to download it?
@lesko503 ай бұрын
hi, it says xls in dropbox was deleted... do you have another link? thanks alot. !!!!!!!!!!!!!! liked and subscribed !
@TaoDeChing-ls5gz Жыл бұрын
How can can the position delta be zero if the gamma is changing? Gamma affects delta no?
@PeterXian2 жыл бұрын
Why interest is divided by 250 but not 365 days a year?
@nicucristian60303 жыл бұрын
How about dynamic delta hedge, how would loses be with that strategy?
@peteatlondon5 жыл бұрын
surely 60shares not 0.6 shares - as 1contract is for 100 shares
@bionicturtle5 жыл бұрын
nope, it's not illustrating a contract, it's just illustrating one option (I don't say contract anywhere). The one option can be scaled by any number
@taylor_o4 жыл бұрын
@@bionicturtle i was confused too... Thanks for clearing things up with this comment.
@yshaool2 жыл бұрын
@@bionicturtle That is confusing but makes sense because the price of the call is also for one and not multiplied by 100.
@fantasyrookie87573 ай бұрын
Looks like the spreadsheet has been deleted
@harryj10812 жыл бұрын
How would you be possibly knowing which part of the open interest the MM is short or long? Because without that information you will never know their true exposure
@harryj10812 жыл бұрын
Also there’s a retail investor making a NOPE index to roughly calculate the delta exposure of MM by using Vol times delta and summarizing all strikes with all expirations. Clearly it’s very misleading isn’t?
@pathaha48702 жыл бұрын
this is called robbery 😂
@shumlanguage3 ай бұрын
Stocks move a lot, so trying to delta hedge sucks basically.
@Truthcanbeconfusing3 жыл бұрын
My smooth ape brain no understand. Need sleep. Come back on a few try again.