Deep in The Money Options

[moka2]

Hi
Does anybody use Very Deep In The Money Options as a hedging tool?
We know DITM Options can be used as a Stock replacement but what about using it as a hedge? against a holding you may have!
DITM means with delta of 0.9-1.0
Anybody tried / back tested that

 

[options-george]

Hi
Does anybody use Very Deep In The Money Options as a hedging tool?
We know DITM Options can be used as a Stock replacement but what about using it as a hedge? against a holding you may have!
DITM means with delta of 0.9-1.0
Anybody tried / back tested that

Hi Moka,
would you be ok to elaborate on what you mean by 'hedging against a holding you may have'?

Look forward to discussing it further,
O-G

 

[moka2]

Hi Moka,
would you be ok to elaborate on what you mean by 'hedging against a holding you may have'?

Look forward to discussing it further,
O-G

Long deep in the money Option mimics holding the underlying with delta close to 1.0, then in same a/c you could short the same and hope that it moves in a big way... having written this I think there is perhaps a better way of doing this perhaps using Option only! I am sure some expert will show us

 

[options-george]

Long deep in the money Option mimics holding the underlying with delta close to 1.0, then in same a/c you could short the same and hope that it moves in a big way... having written this I think there is perhaps a better way of doing this perhaps using Option only! I am sure some expert will show us

If you are long a stock, and are looking at going long DIM-put or short DIM-call then you may as well just close your stock position.

This is because hedging a stock position with DIM options in the way that you propose (if I understood you correctly) would also have close to zero deltas. Having no position has zero deltas.

Hence I am not quite sure what you are aiming to achieve?

[normally long stock positions are coupled with OTM puts as an insurance mechanism)