Delta Neutral Organization

Andy_Trade said: "Hello everyone, I'm new to this forum and I've been searching for some answers far and wide. I was immediately attracted to the concept of delta neutral trading. I have learned a lot about it and have put on some mock trades. I'm doing okay so far, have made mistakes big and small and have tried to correct and adjust as best as I know how. The 3 big drawbacks people usually cite with regard to delta neutral trading: 1) High fees 2) You do need a decent amount of capital to work with 3) Most people don't have 7 hours a day to sit and watch the market and adjust if they need to if a big move happens. What other major drawbacks, if any, are there? Also, in my mock trades, I am having a little trouble keeping everything organized. Is there any way to keep all the information we have to keep track of as organized and streamlined as possible? And what is the best easiest way to calculate unrealized, and realized profits? Where can I learn about this? Thanks, Andy"

Rickster said: "Hi Andy, You dont say what specific method you are using to trade delta neutral, but that is OK because I would rather generalize anyway. With that said, here is what I have to offer. Your biggest disadvantage is the strength of your competition. Say for example you are going long the asset and buying enough puts to be delta neutral. Well, chances are that the pro that sold you those puts will short the asset as necessary to make himself delta neutral. Basically, you guys would have just taken opposite side of the same trade. Thing is, the pro has tons of experience, a time proven computer model, access to information you dont have, and lower fees. Which of you do you think will come out the winner over time. The pro of course. After toying with countless option strategies, it is my opinion that they are sweet smelling traps to get those that think they are clever to pay transaction fees. I have only been successful making money with options when I was using simple strategies. And then, only when market conditions were right. Delta neutral strategies are promoted as a low risk way to trade. It is my experience that the so called low risk trades have the highest concealed risks whereas the so called high risk trades have the lowest hidden risks. I am not saying you should stop thinking about things like delta neutral. Such mental exercises will teach you things you would not have learned otherwise. But sometimes, the tuition can be very expensive."

Andy_Trade said: "I'm using short strangle strategies and I want to try some long ones as well. Sorry I didn't mention this in the initial post. I should specify as it always seems people are coming from a long angle when they talk about DT trading. Also, what exactly are some of the concealed risks involved in going delta neutral that you speak of? Thanks -Andy"

Andy_Trade said: "p.s. computer model of what exactly?"

AJJ said: "Hi, With regard to hidden costs with delta neutral trading for non-professionals you are right. Stock trading is very cheap! the costs for stock and/or future trading for amateurs are not that different from pro's when using online brokers. Therefor a strategie for a cheap way for gamma trading is: Buy 10 puts delta 50 (if you think the vola is low off course) Buy 500 stock or equivalent in futures (delta 500) Now with regard to having a risk management disadvantage against pro's just enter your position in the straddleplanner an manage your strategy just like a pro. In this way you can create scenario's for when to buy/ sell stock or futures. With regard to not having 7 hours per day. you can put in your buy and sell orders limits for eg the next whole day or week. This is just one of mutiple trading strategies you can do as a amateur, without having any pro-disadvantages. Goodluck. And off course be aware. Trying this strategy could cost you the entire option premie (This would however require a serious portion of bad luck) AJJ"