16 lines
1.1 KiB
Plaintext
16 lines
1.1 KiB
Plaintext
Why Trade Delta Neutral?
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A few years ago, I was teaching a class on option trading. Before the
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seminar began, I was talking with one of the students in attendance. I asked
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him what he hoped to learn in the class. He said that he was really
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interested in learning how to trade delta neutral. When I asked him why he
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was interested in that specific area of trading, he replied, “I hear that’s
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where all the big money is made!”
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This observation, right or wrong, probably stems from the fact that in the
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past most of the trading in this esoteric discipline has been executed by
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professional traders. There are two primary reasons why the pros have
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dominated this strategy: high commissions and high margin requirements
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for retail traders. Recently, these two reasons have all but evaporated.
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First, the ultracompetitive world of online brokers has driven
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commissions for retail traders down to, in some cases, what some market
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makers pay. Second, the oppressive margin requirements that retail option
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traders were subjected to until 2007 have given way to portfolio margining. |