It’d keep the mods in a job at least 
BTW Rhody- do you write for Reuters IFR by any chance?
Very simply, I somehow came across this forum and saw the question posted by this thread owner and could see right off that no one could give him good CORRECT information on options.
Seems I was right. I just posted good correct information and that seems to have started a war. Why?
I have no need to try and glorify myself, my knowledge is my knowledge and 30 years of it does not make it insignificant.
My handle is NOT a boast, it is just a simple fact. I do not have all the knowledge there is on options but I certainly do not tolerate misinformation which seems to be much rampant.
Since my sharing of what I know is not welcome here, I shall remove myself.
I wish you all well.
EXPERT
I am not sure what you mean by the term " Banks Delta Hedging" but if you want to discuss Delta Hedging, I can tell you everything about it but there is not much to it.
Delta Hedging is NOT a static hedge by the way, it is a dynamic hedge. When the market has moved, your hedge ratios will also creep away, either for or against you but adjusting it is not much of a drama.
EXPERT
That’s the trouble with online forums - people often gets misconstrued as being antsy when the writer see it as plain factual. No wars here, no hard feelings.
Re delta hedging - it’s bank hedging of their option portfolios I’m interested in. I know the spot hedges are dynamic, and I know the general theory but not the practice. In reality, how often do the banks adjust their hedges in the spot market? Obviously every minute isn’t practical, every day leaves them too vulnerable, but I’m just trying to get an idea of how often they dip and out of the market.
Cheers
And my point is that I am not either but that your responses would indicate very much to me that either you do not have extensive hands on experience on options or whoever taught or trained you passed on massive misinformation.
In any case, if you can have that misinformation cleared up, you would see a brand new world…one that I am sure will amaze you for because you will find that trying to guess market direction a real exercise in stupidity.
But then again, the money is yours to lose, who am I to tell you otherwise.
I wish you well in any case and this will be my last post so there is no need for anyone to get fired up just because I answered a post here by someone seeking for information and I was in a position to give that information and that I will not allow for misinformation.
May you all find your Holy Grail.
EXPERT
I am not at all sure of what you are seeking here but every trader will hedge for different reasons and different anticipated outcomes so if you can tell me what you are trying to achieve, I can give you several ways you can get to where you want to be. Spot hedging is static by the way, it does not shift. It the size match, you have zero leakage unless you are using a triangulation with two other pairs.
Let me know what you want to achieve and in less than 15 minutes I can give you some ways to do it.
EXPERT
Ah, OK, I’m not looking to trade options myself. But intraday, big option traders constantly adjust their hedges in the spot market - this is definitely dynamic. I know they often buy and sell on S/R, but I’m interested to know roughly the frequency of how often they adjust their portfolios. Very specific question I know, but very useful info…
I still don’t see what you are getting at but what it would seem like to me is someone using a SYNTHETIC to job the market…ie…scalp.
Used properly, this is a good way to scalp the market without fear of being caught in a runaway break and can be extremely profitable.
First you determine the direction you are going for your scalp. Let say you reckon EUR/USD is going down, you would want to short it and hopefully catch a few pips. You establish a long CALL at a strike below current market and proceed with your short position.
What you have done is to have created a SYNTHETIC PUT and you wait for the market to go down as you anticipate. If the market decides to stuff you up,seems it likes to do that all the time… you are not exposed as you are protected on the upside.
If however, it co-operates and move down past your spread and start to be profitable, even by a few pips, you can set off your spot for a profit and wait for it to go back up by a few pips and then re-establishing your initial position. The market could move up and down between these few pips and you could be going in and out every few seconds or few minutes adding up to a lot for a day’s work.
Each time you are scalping…be it in or out of the spot, you do not have an exposure and any untoward moves for or against you have no effect.
It beats having to scalp with an open risk.
EXPERT
Thanks - but I’m maybe not explaining clearly enough. I really don’t trade options or have a desire to. I’m sure they can be profitable, but spot is as well (for me). Some people hedge with options - I just exit the trade, but then I do trade longer timescales.
My question is specifically about the banks multi-$bn option portfolios and how they often they delta hedge their exposure…
Guilty as charged.
I think what you’re actually asking - and please tell me if I’m wrong here - is how often the banks [I]adjust[/I] their delta hedge, assuming that they are in fact delta hedging their portfolios. If the bank’s portfolio was static, then you’d basically say as often as price movement dictates that they do so. Of course the portfolios are not static, so they will have to adjust as the exposures change.
That is entirely the trader’s call. No one will know except the trader himself. According to what his strategy might be…he may not even be hedged. It could be a speculative play.
EXPERT
I will share this with the gentleman who was the first to teach me about options in my relative youth. I’m sure he will be very tickled. He’s writing a book on options at the moment. 
Hahaha. There is a saying in the pits. Those who can’t work the markets teach or write books about it.
With the few books on options in the market…that seems very much to be the case.
That’s my observation anyway.
EXPERT
That’s the one, thanks Rhody.
Maybe take this back to basics. If I - investment bank - sell a $100mn 25 delta call, I’ll hedge $25mn straightaway, and then either shore up that hedge or reduce as spot changes (as the value of delta changes). So how often are they adjusting their hedges? In other words, how active are option traders in spot?
Expert, surely the investment banks aren’t engaging in pure naked one-sided bets are they? Maybe I’m being naive, but I presumed at the volumes they trade they’d be hedged up to the eyeballs.
There are endless permutations to what they can do. Trying to outsmart them is not a good way to trade because you are trading in EFFECT and not trading at CAUSE. You jump when they say jump and sit when they say sit.
Would it not be better to be trading at CAUSE and let them be at EFFECT. Then they will be watching your every move…jump when you say so and sit when you say sit.
EXPERT
Tell that to Taleb… there’s a reason he looks so smug
Can’t stay away can you? 
Having read some of the books that are out there - especially the academic ones - I won’t disagree with your view at all. One of the funniest things I ever heard was that the guy who came up with Modern Portfolio Theory (I’m totally blanking on his name right now) couldn’t bring himself to actually put it into practice in his own investing.
What I’ve apparently not expressed very well is that I’m well aware of how options can be used to do just about anything in the market that one could imagine. For my part, however, I have not to this point been in the position to do more than scratch the surface of that potential in my own trading for a number of reasons along the way. Maybe that will change in the future.
I agree. Seems like every day there’s chatter about this strike or that strike being a major option level. It almost never amounts to anything.
I will say this… about the only thing OPTIONS can’t do is make coffee !!
and I am not far wrong too. The greatest thing that I have come to achieve with options is that I can be and am in the market 100% of the time. I am never out of the market weekday or weekend.
I can do this because I have zero exposure 100% of the time. You cannot make the money if you are not in the market. If you are not in the market when it moves, you are only a spectator, you don’t make money.
I can be in the market 100% of the time because properly structured, options can be set up with ZERO margin and in extreme cases very small margins anyway.
When you get to that point you will know what I mean when I say you will be amazed.
EXPERT