Option Gain

Hi,

I have a feeling that using Delta is not the most optimal way to hedge or create neutral strategies when the delta is not a constant. Delta deals with small movements but in “wild” markets such movements would be large before the opportunity to rebalance. Even if rebalancing is done it would be very frequent and the transaction cost would be large. I would advocate strategies which would consider the completer evolution of the Greeks and discretaised influence when a value suddenly jumps. The values that make large discrete jumps could be interest rates and dividend payments, while price could make small and mid size jumps depending on liquidity.

Best regards, Suminda Sirinath Salpitikorala Dharmasena