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DELTA TRADING



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Further to the  'is 1% a week possible' thread a few of you expressed
interest my response on DELTA TRADING.

Firstly to respond to the scathing replies:

I believe that people are too obsessed with Stats and that System report
sheet on Tradestation

It is very difficult to calculate all the stats when options are SPAN
margined in a portfolio - therefore calculating return to satisfy
Tradestation criteria is meaningless.

Those who are interested in delta trading the details are as follows:

1) The capital requirements are massive
2) you need to have very low commissions as options are expensive

The methodology is as follows:

Find point where the market is most likely to move (usually some sort of
extreme oscillator level on a time independent chart)

Buy 100 at the money calls and sell 50 futures (delta is neutral) (possible
to execute a delta neutral trade)

When market moves re-establish delta neutrality by adjusting amount of
futures, or close position out.

If market does not move within three days close position - losing only 3
days time value in options position.

The key to the system is to find a accurate way of finding a market
inflexion point.


Hope this provides some fresh ideas to people - Found out that a lot of
prop desks at Banks use systems along these lines.

Mark
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