Let’s summarize first. Under the state of dynamic hedging

The ups and downs of the market are beneficial to buyers, and they can continue to accumulate profits.

The same market conditions are disadvantageous to sellers, who are actually being exploited by their counterparts.

This is why I do not recommend that novices use DDH too early on the seller side.

It's like when you play a game and you are given a bunch of auxiliary tools, but without them you don't even know what the underlying risks are like...

Today we will mainly talk about the seller's perspective

The seller needs DDH to make appropriate stop losses, and the buyer also needs it to make appropriate take profits.

If the market goes sideways, there is no need for DDH and the seller wins big. On the contrary, if the seller's hedging cost for one day is much more expensive than the premium he collects, then he will lose money.

However, the seller has locked in the risk of further market expansion through this method. In fact, the core of his cost is the cost paid for gamma.

If your leverage is very low and you don’t care about the current volatility or further volatility, then DDH is unnecessary and you can choose manual hedging.

DDH can be used in advanced tools at signalplus.com

You need to re-enter the API and then set it according to your current exposure and the range you triggered. It is not difficult. I believe that those who play options will understand it. Please note that if your gamma is already very high, I strongly recommend buying some covers to reduce gamma before hedging.

Otherwise, the daily hedging cost will be very high. (What is high? My personal positioning is 30% of the position. When the fluctuation is 7-8 points, for example, I have 100 BTC, then the gamma of 0.34 is already very high, because when the fluctuation is 100 points, the delta is basically equivalent to 30% of my account exposure. Please note that in the case of currency standard, positive 30 is much more terrible than negative 30. Those who have had their positions blown up will understand.)

After you sell a lot of calls

DDH means to continuously buy futures to prevent your breakthrough calls from causing too much damage and lock the loss within an acceptable range for you.

For example, if you have 100 2-bits, delta is -30. Gamma is 0.3, and it suddenly rises by 100 points, your delta will be -60. If it rises again, you will be very hurt. However, if you set the range of DDH to 5 deviations here, you will hedge. Then, when it is -35, you will buy futures to lock it at -30 again. The loss in the second half can be halved. However, if it falls back again, you will reduce your position, which is equivalent to buying high and selling low to contribute to everyone. Therefore, when the options website sometimes triggers the DDH of a large number of accounts, the slippage at the high point will be a little large, that is, many people buy in DDH and push up the instantaneous price.

The same is true for PUT level

If the cost of DDH on that day is less than the seller's profit, the seller wins.

On the contrary, the buyer can use the same method to make money by continuously taking profit on DHH. If the buyer's DDH cost on that day is less than his daily premium, then the buyer wins.

So here we can roughly see that if the buyer adopts the DDH approach, the forward period is more likely to be used, because the forward premium cost is lower.

, especially if IV is still low

Sellers tend to use DDH when playing doomsday and short-term options because the premiums are high.

There are many details in the actual operation, and I don’t use them very much, so I won’t go into them. However, I am considering opening a few accounts to specialize in dynamic hedging and shorting volatility ideas, and I will continue to share my experience on the planet.