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Delta

The unknown obvious: what chart types to use for each taskFirst of all, price charts are not price charts, at least, not exactly. There are always 2 prices: the price to buy (ask) and the price to sell (bid). Real price charts are actually the history of where BBO was located. If for some reason you'll wanna check that and you don't have the real data, the best you can do is to open a line chart based on close prices on the highest possible resolution, and compress it all the way down. Second, all charts are built from ticks/trades/deals, which is the fundamental particle of the market. Every tick has a timestamp. The only right way to aggregate ticks is by using time. If you’re using volume bars, tick bars, whatever, you’re losing information. There are many other very obvious reasons why it doesn’t make sense to use these kinds of charts, but it’s all inessential since you’re losing information. There's one specific task when you need to use volume/range bars, bur that's inessential 4 real and gonna be explained later. So, bar & candlestick charts are the charts of time-aggregated deals aka recorded trading activity, not "price charts". On the assets where you don't use volumes but infer volumes from prices, you'll need 2 charts: 1) Bar chart: to locate levels and infer volumes (we infer volumes from bar ranges); 2) Candlestick chart: to infer volume delta from Close minus Open distance compared with the bar size. Footprints/cluster charts are used on assets where the volumes can be trusted, was explained before in "Real levels: PVMs".
NYSE:MAN
by gorx1
You ever dance with the devil in the pale moonlight?Last night futures bounced off JHEQX Zero Gamma support. Significance of this level can not be understated. Losing 3585 may find support below from JHQDX long put flipping positive gamma. With VIX at 32 you should be expecting a 2% move a day. I have an alert at 34 VIX as the point where we could see a pop higher. GEX on SPX is -2.5B which implies more volatility to a range of 3% or more. I predicted CPI will be lower because commodities reached a low by the end of Sept. After a lower CPI I expect a rally to close the range on JHQDX long put as a target close for end of October.
CME_MINI:ES1!
by SPYvsGME
11
Updated Delta/Gamma IndicatorUpdated Delta/Gamma Indicator to include the strikes for the current strategy. You will be able to leave it blank to generate the strikes. You can use the Indicator on ES Futures as it sources SPX and VIX directly. I wanted to show you all the delta accumulation of JHEQX around the first 20 Days (and 20D moving average) The accumulation of delta in the first 20 days is a fairly good leading indicator for where the rest of the quarter is going to go. The reset of the hedge also predicts many tops and bottoms throughout the recent years. Late 2018 & Early 2019 Negative accumulation to expiry, flipped positive, reset and accumulated just over 20D Cause If you zoom out and see look at the volume during the 3 weeks prior to end of quarter (quad witching) . Effect A lot of deltas and gamma roll off after a quad witching. This frees up the indexes just as JHEQX gains strength 3 weeks prior to its end of month expiry. Tiny Update (JHQTX) The smallest and current just rejected the ITM Put. Short Squeezes if 3800 breaks. Mamma Update (JHQDX) Mamma is deep ITM put territory and reaching strongest effects the final 3 weeks prior to expiry. Under 3600 gamma will flip positive (supportive). At 14k contracts, Mamma can not bounce the titanic, but in the past quarters it finds a way to stay out of the money. Expect Momma to try and run up to 3900 in the last 3 weeks of October. This fits in with my idea that the next CPI will print lower and provide a short term bottom for indexes.
CME_MINI:ES1!
by SPYvsGME
14
Delta and Gamma IndicatorPutting the finishing touches on a delta / gamma indicator. Only outstanding issues is to complete is fixed strike implied volatility. Check FAQ I created here if you have questions about it. The indicator can be configured to reset on the 1st, 2nd or 3rd last business day of the month. The first new day after the reset the new strikes will be calculated. The purpose is to see a visual representation of hedged equity funds put spread collar history. Hedged Equity Fund Reset: EOM Dec, Mar, Jun, Sept Mutual Fund: JHEQX Assets: 15 Billion Contracts: 44.5k Here is the main equity fund collar strategies history. This fund was established in DEC 2013 and grown into one of the largest managed equity funds. I talk a lot about how this fund creates a pinning effect to the market around quarterly expiry. With the history now in full view, you can clearly see a recurring pattern as the largest index in the world follows a put collar through zones of support and volatility. Hedged Equity 2 Fund Reset: EOM Jan, Apr, Jul, Oct Mutal Fund: JHQDX Assets: 5.7 Billion Contracts: 14k This funds reset frequently finds nearly the exact same close from the previous quarter. Hedged Equity 3 Fund Reset: EOM Feb, May, Aug, Nov Mutal Fund: JHQTX Assets: 2.5 Billion Contracts: 7k Not as many contracts but still provide short term support and resistance.
SP:SPX
by SPYvsGME
1
The last 100 meter dash to the finishAfter a sell off in futures overnight we are back down to 3680 range on ES. That is 100 points from the JHEQX 3580 Long Put which deltas are displayed at the bottom. Yesterday we saw dealers buying up their short deltas. But there is 2 trading days before reset, will dealers not have to short deltas as price drops again? No. As time passes and price stays out of the money (> 3850) the Fixed Strike Implied Volatility will have less impact on the puts deltas. Should we drop another 50 points over RTH we could see the dealers selling deltas short again which would lead to the second 50 point drop coming much sooner. For those who I sent this script to, please remember the IV used to calculate the deltas for this put are not correct yet. So even if you see the deltas go up, check your broker app or an options calculate that can calculate the proper implied volatility. Market makers and options calculator seem to use different variations of Black-Scholes and how they calculate IV. I'll continue to update this idea and track the reset deltas the day of Sep 30. Bottom Line. I don't expect much change in deltas the next 2 days. Previous day -1B GEX territory that implies larger than average move today +/- 1-2% or more Expect volatility. Sideways Chop or even a rally if DXY continues a trend lower into Friday.
CME_MINI:ES1!
by SPYvsGME
4
BTCUSDT 1W long-term forecast BTCUSDT 1W long-term forecast from WunderTrading A separate picture shows the Delta 1W. Delta = Ask - Bid Delta allows you to see the true buying and selling and understand who dominates the market It is important to note 3 factors for the delta: quantity, magnitude subsequence The green zone is a zone of increased power of buyers: Significant increase in green delta The size of the delta is above average, which indicates an increase in its value Lack of seller and increased green delta consistency It is important that so far we see a zone of low volume. Which indicates the likelihood of a decline to 10,000-12,000. This will probably be the last move down. Globally, we are at the end of a downward cycle
Long
by Wunderbit
Options Trading / Gaining the Edge & VIX Curve Implications Options Leverage has become increasingly popular over the past decade. In the past 30 months, their popularity has risen significantly relative to the Underlying Instrument. Increasingly so, Options tend to move Prices through the effects of Leverage. This is why we see Stocks Split, it vastly reduces the Price of Entry and increases the Potential for increased participation. As in all Markets, Liquidity plays the most important Function. ________________________________________________________________________________ The Traders Edge is best capitalized through an understanding of the Derivatives/Options Greeks as well as VIX timing (previously discussed and linked below). I will thoroughly explain the relationships and provide direct correlations using Price in each example. Simplicity will become self-evident after All the Variables are explained. Directional Risk Management is the Traders Edge. It provides the Risk/Reward parameters in Options Trading will make you a far better Options Trader. ________________________________________________________________________________ Options are a 1st Tier Derivative, ie. - their value is "derived" from an underlying asset. How this value is derived depends upon a number of factors: 1. The 5 Greeks and their functions - Delta, Gamma, Theta, Vega & Rho. With any Derivative - Dependent and Independent Variables define the Function. Greek Dependent Variable Independent Variable Delta Option price Value of Underlying Asset Gamma Delta Value of Underlying Asset Vega Option Price Volatility Theta Option Price Time to Maturity Rho Option Price Sensitivity to Risk-Free Rates Let's put this into context with simple and concise examples of each. ________________________________________________________________________________ Delta - How much the Options Price will increase or decrease with a $1 move in the Price of the underlying Instrument. By Example: Underlying Price of Instrument = $100 Options Premium = $2 Delta = $0.60 For instance - were the Price to move from $100 to $101 the Price of the Option would increase by 60 Cents to $2.60. Were the Price to decline from $100 to $99 in the underlying instrument, the Price of the Option would decline to $1.40 ($2.00 - $0.60). It is extremely important to understand Implied Delta is to occur at any point in time prior to or upon Expiration. Think of Delta as the Probability of your Options Potential, as well, it is actually the Number of Shares relative to the Options 100 Share implied leverage. An out-of-the-money Call Option with a 0.25 Delta has an estimated 25% probability of being in the money at expiration. A deep-in-the-money call option with a 0.90 Delta has an estimated 90% probability of being in the money at expiration. A Delta of 1 cannot occur as it implies Par with the underlying instrument and provides Zero incentive/profit Potential. This is important as we can observe it would be far more intelligent to purchase the underlying outright. For example, with a Delta of 1, for every $ move higher in the underlying, the option price would rise by $100. As you can see there is no incentive to simply not purchase the underlying instrument, it becomes a zero-sum game. Think of Delta in its simplest form with respect to Leverage. Delta in my example above is $0.60 - you are leveraging 60 Shares as opposed to 100 @ a theoretical Delta of 1. Delta's implied theoretical ranges: Calls - 0 to 1 Puts - 0 to (-1) Actual Range @ the Money 0.50 Delta - therefore a Trader is leveraging 50 shares. Why? Because a Trader does not technically own the shares. Consider it the Options Writers Profit Margin or Vig. The further in the Money on an options chain, the higher the Probability your Option will have less Risk. Of course, there is a premium to Risk/Reward as we move lower and away from the underlying Instrument or Share Price. ________________________________________________________________________________ Gamma - How much Delta change with a $1 move in the underlying Price. Delta and Gamma are both affected by Price movements up or down by $1 increments. Continuing our Example above: Underlying Price of Instrument = $100 Options Premium = $2 Delta = $0.60 Gamma = 0.012 For instance - were the Price to move from $100 to $101 the Price of the Option would increase by 60 Cents to $2.60. The Delta will change as it will include Gamma after the $1 Price increase: Delta 0.60 + 0.012 or - 0.612, the New Delta or $2.612. As the Option price moves towards In the Money, once again - Gamma will increase. It is important to lock down the context, these are Price relationships - Delta and Gamma. ________________________________________________________________________________ Theta - Options Prices decrease as Time passes moving to the Expiration Date aka "Time Decay" There are 2 distinct variables to decay. 1. Intrinsic Value: Simply put a Call option will have Intrinsic Value when the underlying Asset is above the Strike price of the Option. By Example: Underlying Price of Instrument = $100 Option Strike Price = $90 Intrinsic Value of Call Option = $10 ($100 - $90) Intrinsic Values can only range from Zero to a Positive number. For Put Options, the Value is the opposite, or when the underlying Aesst is below the Strike Price of the Option. Underlying Price of Instrument = $100 Option Strike Price = $110 Intrinsic Value of Call Option = $10 ($110 - $100) Intrinsic Value is Directly related to Price and only changes when the underlying Price changes. Time has no impact on an Options Intrinsic Value given there is no change in the price of the Underlying Asset. 2. Extrinsic Value: aka "Time Value" or Options with more time until expiration will have more Extrinsic Value than Options with less time until Expiration for the same underlying Asset for the same Expiration Cycle. ie. OPEX Date. Why? Over time Price ranges have the potential to expand and contract. Expansion leads to Contraction and vice versa. LEAP Options - 365 or more Days to Expiration have immense Extrinsic Value due to the component of time. It is important to note Theta begins its larger declines within 30 to 45 Days of Expiration. Theta goes steeply negative within this timeframe with a very High Probability. "Time" truly is Money - Extrinsically. Less Time, less Extrinsic Value, less Money. Options lose Time Value (Extrinsic) - Theta is expressed as a Negative Number. By Example: Underlying Price of Instrument = $100 Theta = $0.50 Time to Expiration = 10 Days Option Strike Price = $90 ($10 Intrinsic Value) Theta (decay) $0.50 X Time (duration) 10 Days = $5.00 of Extrinsic loss over Time to Expiration (Theta). Projected Theta Burn (decay) implies the Price of the Option will be $95. * This assumes there is No Change in Implied Volatility (More on this later). It is important to note when your Portfolio may show a steady change in Portfolio Theta, this is should not be assumed to be a linear function as Delta or Change is the only Constant. Markets move Higher and Lower with increasing Volatility. Changes can and are significant. ________________________________________________________________________________ Vega - Changes in an Options Value with respect to a 1% Change in Volatility or the Implied Volatility (aka the Widow Maker). Why the Widow Maker? If (IV) Implied Volatility drops significantly while the Underlying Asset's Price remains constant. This is an extreme example, but one that has become increasingly more common since September of 2021. Implied Volatility is the expected change to Price in the Underlying Asset's can change over time. Consider it the Price Range. It is important to remember an Options Price must change for Implied Volatility to change. Simply Put - a change in demand for an Option over time will determine its Implied Volatility. Supply becomes a Factor as Risk (implied volatility changes) - you would not want to assume the Risk of selling Naked Puts in a downtrend. Supply would decrease and Premiums would rise. The overall level of confidence and Fear would dictate demands while Supply would Price Risk. Conversely - and this is the Key, any option with a Higher Extrinsic Value will have higher Implied Volatility. By Example: Underlying Asset 1 Price = $110 Call = $100 IV = .69 Underlying Asset 2 Price = $105 Call = $100 IV = .47 A favorite time for the IV Crush is into Earnings of the Underlying as Volatility drops significantly aka - Buy the Rumor, Sell the News. As well, the timing of VIX Roll to Settle play a very large Role in Vega, as does the term Structure of the VIX Curve. Timing and Positioning in Time are the leys to the proverbial Kingdom in Options Trading. An Options Price changes by its Vega with a corresponding move in the Underlying Price of the Assets, Implied Volatility will rise by 1% By Example: Underlying Price of Instrument = $100 Option Strike Price = $90 Intrinsic Value = $10 Vega = 0.25 Implied Volatility = 60% Option Price $10 + Vega $0.25 = $10.25 Implied Volatily = 60% + 1% = 61% What has the highest exposure to Vega? Options At the Money and those with High Extrinsic Values. Remember, Volatility scales with Time, contraction to expansion. By Example: Implied Volatility is expressed on a 365 Day Basis. $100 Underlying Price Implied Volatility = .25 We can simply calculate the Range for the Underlying Price for the next 30 days: 1 Month Range = $100 x 0.25 x Square Root (30/365) Or $3.45 either side of $100 Or $103.45 to $96.65 or a $6.90 range. Finally - and of extreme importance: The shorter the Duration the more Extremes in Volatility affect Price. A large Decrease or Increase in an Underlying Assets price will have a far more pronounced effect on Options of shorter Duration. Melt ups and Melt Downs can be anticipated for Large moves in Leverage and isn't this what today's Options Trader is seeking.. the answer is yes, absolutely. The Setups require patience and an Edge over the Greeks. ________________________________________________________________________________ Rho - Measures the sensitivity of the option price relative to interest rates. A benchmark Interest Rate increases by 1% - Option Prices will change by Rho's Value as a percentage. Rho is presently within an arrangement unseen in prior Cycles, be it Business or Credit. The Treasury Curve, as well as the Effective Funds Rate, have direct Impacts upon Rho. Underlying's Alpha (Which has lower Volatility and higher Pricing Power) has less sensitivity to Rho - to a point, a point where Rates become too burdensome on the Economy. Underlying Beta (Which has Higher Volatility and Lower Pricing Power) has more sensitivity to Rho as forward Earnings are more steeply discounted to Low Beta or low to high Alpha. Given the tumultuous environment currently, Rho is being turned on its head as this Cycle is quite frankly unlike any in history. it Rhymes, yes, its repeat will be similar to Long Cycle Durations. This primarily due to the expansion of Credit and Default/Liquidity Risks present which are unseen in Human History. In prior expansions, rising yields had a profound effect on Bank's Balance Sheets. That was then, Rho would provide a lift to Delta increasing the Value of an option. The exact opposite is beginning to occur now and will likely stay in trend for some time. The math is exactly the same as above, this is where you, dear trader get to exercise your skills in what you have learned. Reminder: Delta and Gamma are Price Calculated in $1 Increments. Theta, Vega, and Rho are Percentage Calculated in 1% Increments. ________________________________________________________________________________ This week will be particularly challenging given the sheer size of this Expiration @ Quad Witching in Septenber 16th. With CPI due Wednesday and the FOMC the following week. It's going to be Volatile in the extreme. I hope this helped you in gaining an Edge with respect to trading Options. Trade Safely, with the Edge, and Good Luck this Week. - HK Please remember the VIX roll to Settle Strategies I discussed here -
TVC:VIX
by HK_L61
5
DELTA | Wave Analysis | Target Projection - Take Profit ZonePrice action and chart pattern trading setup - take profit position > A descending triangle major wave 2 - ABCDE pattern with 3-3-3-3-3 complex structure > Target: a possible scenario of making D-wave with an upcoming ending diagonal at the upper resistance of the triangle 0.786-1.0 retracement +15-20% upside > Stoploss: at the previous high position a-wave - 8% downside > Risk reward ratio: 2:1 approx. > After completing the D-wave could possibly retrace downward trend 0.382 - 0.786 for the final E-wave which is the most difficult wave to predict. Always trade with affordable risk and respect your stoploss Good luck
SET:DELTALong
by dukeposh
1
How to Calculate the Delta of a HedgeHere I've gone into the options calculator and got the 1% difference in delta for the Hedges I write about. For this hedge (JHQTX) The delta at strikes are as follows: SPX goes down 1% 4030 - 0.0616 3990 - 0.17 Dealer Needs to Sell 0.108 of delta To calculate how much that is for this strategy. Delta * Price * 100 shares * # of Contracts 0.108 * 4030 * 100 * 7000 = $304,668,000 to buy or sell for 1% move in SPX. Since the funds hedge is currently in negative gamma territory, the hedging flows will flow with the market (sell the rips, buy the dips). This is the smaller of the 3 funds. I updated the big one last night because Fridays decline brought it closer to volatility zone, but is still providing supportive flows (sell as SPX goes up and buy as SPX goes down) The big fund (JHEQX) delta flows currently look like this. SPX goes down 1% 4047 - 0.66 4007 - 0.53 Dealer Needs to Buy 0.13 of Delta per 1% move down SPX Delta * Price * 100 shares * # of Contracts 0.13 * 4047 * 100 * 46000 = 2,420,106,000 to buy or sell for 1% move in SPX. For now, even with the smaller fund expiry in 2 days, the big funds delta hedging flows cancel out its impact and adds supportive hedging flows greater than 7x of the expiring small fund. These flows change rapidly as implied volatility rises or falls. So any 1% change today is likely to be different than 1% change tomorrow. The next set of charts I will chart how higher or lower volatility changes effect these dynamic hedged deltas. —— DISCLAIMER — The delta numbers are approximate based on an options calculator and may not be accurate as brokers buying/selling. This information is intended for educational purpose only. I chart these funds to learn the strategies and effects on the market. If you see a mistake please point it out. Thanks for reading.
SP:SPX
by SPYvsGME
8
How a 17 Billion Fund Hedges DeltaJHEQX - 17 Billion Fund - Delta Hedging Flows Today, I’m breaking down the hedging flows of the JHEQX strategy I have been following. The idea is simple. Large fund means you know the dealers position on the trade. Since they remain delta neutral, one can anticipate if the dealer will be buying or selling delta as the price moves up or down. POSITIVE GAMMA (Supportive) Dealer will Buy SPX / Futures during a decline and Sell SPX / Futures during a Rally. When the trade is Positive Gamma it acts as a supportive force for the markets. As the price of SPX moves down near the put strikes, the strategy delta hedging will flip negative. NEGATIVE GAMMA ( Volatility ) Dealers delta hedging will move in the same direction as the market. Sell lower, Buy higher. When the trade is negative Gamma it increases volatility in the market. DELTA GRAPH The delta graph represents the rate of change and direction this strategies deltas will move. You can see today (Aug 28) the curve is muted and doesn’t change quickly. Inversely, the deltas rate of change accelerates the closer to expiry the options get. How does that help? For one, you know where the strategy moves from a positive to negative gamma (is volatile or supportive). Two, you can anticipate the magnitude of volatility or support.
SP:SPX
by SPYvsGME
2
DELTA AIR LINES -BUY OPPORTUNITYDelta Airlines Inc is still in a downtrend that started more than two years ago. The breakout of the support level was not successful, and the price is now heading to the resistance level, giving us a good buy opportunity into the price channel, with a good risk-reward ratio. The next target is located at $ 40 which is located at the 0.5 Fibo crossed with the major resistance Risk Disclosure: Trading Foreign Exchange (Forex) and Contracts of Difference (CFD's) carries a high level of risk. By registering and signing up, any client affirms their understanding of their own personal accountability for all transactions performed within their account and recognizes the risks associated with trading on such markets and on such sites. Furthermore, one understands that the company carries zero influence over transactions, markets, and trading signals, therefore, cannot be held liable nor guarantee any profits or losses.
NYSE:DALLong
by legacyFXofficial