Alpha is a quantifiable edge in systematic trading. A set of predictors that can be evaluated during entry and that have a statistically significant relationship to a position's terminal PnL can be considered alpha.
Vertical Spreads are directional options strategies that can be applied in different market conditions. In this post we are going to show four different ways to use MesoSim's Strike Selector to implement Credit and Debit spreads.
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This is part two of the MesoSim Advanced Patterns series, where we explore practical ways to improve your options trading simulations. Learn how to use 25pt strike multiples, track bid-ask spreads, set smarter entry and exit rules, and integrate external data for better results.
Delta hedging aims to eliminate or reduce the risk of price movements in the underlying asset, and it is a common practice among Options Traders.
Nassim Taleb dedicated an entire book, Dynamic Hedging, to the subject of hedging, and we'll cover some aspects of it in relation to MesoSim.
Delta means the sensitivity of a derivative price to the movement in the underlying asset. It is either expressed in percentages or in total amounts. A 50% delta is supposed to mean that the derivative is half as sensitive as the asset and that one needs two dollars in face value of the derivative to replicate the behavior of one dollar of the asset.
Source:
Dynamic Hedging by Nassim Taleb, Chapter 7: Adapting Black-Scholes-Merton: The Delta