© Stefano Grazioli - Ask for permission for using/quoting: Portfolio-level Delta Hedging

 Easy meter above 3.5 = no panic  More help teams more time: H21 is due next Friday less typing: will give you a file with most of the code

2013: Best mean TE% = 0.68

 Name and Major  A couple of things that you have learned from the class  Is the class getting you to think on your own  What can be improved  Attitude towards the HT

© Stefano Grazioli - Ask for permission for using/quoting: With a portfolio of related securities

 We have seen the 1:1 approach to Delta Hedging  What if I have more than one type of derivative with the same underlier in my portfolio?  Delta hedging still applies... and it can be made even better!

 Perfectly hedged portfolio has Family Delta = 0  This means that the sum of the values of the positions that relate to a specific stock (long, short, call, put) does not change as the stock price changes.

Assume that the underlier is Goog  portfolio =  qty i *  i 1000 * 0.53 – 2000 * 0.46 – 500 * (-0.51) = = 0 long callshort call (different strike) short put Initial Delta Delta that is necessary to make the portfolio delta neutral “Family” Delta for the portfolio

 I need +135 delta on my GOOG portfolio, how do I get it? - Buy stocks - Buy calls (delta > 0) - Sell puts (delta < 0) - SellShort puts  Pros/cons: cash, horizon, cost, tc, stability

Delta for the portfolio of GOOGLE positions: +2,420 Pros/cons: cash, horizon, cost, tc, stability

© Stefano Grazioli - Ask for permission for using/quoting: Spartan Trader

© Stefano Grazioli - Ask for permission for using/quoting: What Is New In Technology?