Volatility Trading and Delta Hedging Examination (Pengujian Deviasi Trading dan Delta Hedgingnya)

Bagaimana kita menentukan suatu volatility dari trading beserta delta hedginya?

1.    Pertama-tama kita harus mengidentifikasi the mispriced option (data diambil dari Bursa efek di Australia /Australian Stock Exchange, dalam hal ini Bank ternama di negara kangguru tersebut seperti halnya ANZ Bank)

Step-1: Download 1 year’s data from yahoo finance

Step-2: Calculate SDEV (Historical Volatility) and prepare for Relative Valuation(dari data yang kita dapat dari tabel ASX diatas). dengan ketentuan:

Implied volatility > historical volatility, options are overvalued

Implied volatility < historical volatility, options to be undervalued

Step-3: Select equity option ANZ -->>Implied Volatility: 31.20, Historical Volatility: 13.43, thus IV> HV, speculated that option could be overvalued (dalam hal ini Implied Volatilitynya 31.20 dari tabel yang nilainya lebih besae dari historical volatilitynya 13.43 sehingga disimpulkan angka option yang kita pakai dalam kasus ini bernilai overvalued)

2.    Langkah ke 2:

Creating Delta neutral portfolio:

Step-1: Select options of ANZ based on strike price dari tabel (the price=27.00) and expiration date (May 2018)

Step-2:  Short 10 calls and purchase required stock to get the delta neutral portfolio

3.    Langkah-3:

Holding delta neutral portfolio for 2 weeks:

Performance of the portfolio:

Week-1

 Above graph depicts the performance of the portfolio in week-1. Here, we have observed that total value of the portfolio is going up gradually, but the return of the portfolio has decreased dramatically, which is expected as it is an overvalued option, as per our findings.

Week-2:

 

In week-2, again we have observed the same as like in week-1. This portfolio value and returns are also going in opposite directions, but this portfolio return has started recovering the return after one days. This week portfolio performance is better compare to week-1

4.    Langkah-4

After end of first week we have found the holding period return from the portfolio was 0.7% and after second week it was .05% respectively. Yes, our portfolio has performed as per our expectations, it was expected that the return will be lower if we hold this portfolio for long.

Since, the option has been identified as overvalued, it would not be a wise decision to hold it for a long time; likewise, an undervalued option. In our point of view an overpriced option is a good thing for selling, hence its better to close the position early rather holding this option for three weeks

Written by: Saefudin

Professor reviewer: Dr Ivan Obaydin

Flinders University, Australia 

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