[TheOptionClub.com] Understanding Delta Hedging (AAPL)

 

Dear All,

I'd like to get some feedback and guidance as I try my hand at Delta Hedging.

I sold an Iron Condor on Apple, but have taken off the PUT side and am now concerned only with the remaining Call Vertical.

It's a Call Spread on AAPL (6 contracts April of -230C/+240C). Now AAPL is at 230, my position has a delta of .25, so I loose a quarter for each dollar apple rises.

I just bought 150 shares of AAPL at $230, reasoning that to neutralize the .25 delta, I would need to buy 6 contracts X .25 of shares.

So for the time being, or for the next dollar rise anyhow, I'll balance the loss in the spread by the gains in the shares. this will work until, if AAPL keeps rising, then the Delta will rise too and I'd be back holding some loosing Delta. At that point I'll consider rolling.

This is my first use of this technique, and I'd love to hear from those who have used this idea before:
- did I do this right?
- where do I go from here? I guess I keep an eye on my overall Delta and adjust the share position as needed to try to remain D neutral.
- Anything else you think I should be aware of.

Many thanks
Lance

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