Hedge Ratio Analysis
What is the Hedge Ratio? The hedge ratio is a powerful tool for predicting market behaviour, pinpointing the exact levels on an index where dynamic delta hedging will likely trigger significant buying or selling activity. It allows traders and investors to anticipate shifts in market momentum and identify where futures trading will intensify, providing a strategic edge.
The Predictive Power of Dynamic Hedging: Dynamic hedging is the process of continuously adjusting a hedge to stay neutral as market conditions change. When managing a non-linear position, such as options, with linear instruments like futures, the sensitivity to price changes (delta) shifts as the underlying asset's value fluctuates. To maintain a balanced, zero-delta position, the hedge must be adjusted frequently. This constant recalibration is known as dynamic hedging, and it's where the hedge ratio steps in, offering a roadmap for where these adjustments will occur across the market.
Find our latest articles here
The SPX goes from R1 to R1 traversing the entire 260-point Y ratio bandwidth. Nb. Our comment for 10/09/24 We
Posted in Uncategorized Tagged with: derivatives, SP500
After the FTSE’s zones bottom boundary saves the bulls last week, the ratio shoe is now on the other foot.
Posted in Uncategorized Tagged with: derivatives, FTSE
After fun and games in the June expiry, the FTSE starts July in an interesting position. Nb. Our comment on
Posted in Uncategorized Tagged with: derivatives, FTSE
The SPX enters the final two-weeks of the May expiry in the middle of its Y1 Ratio bandwidth. Nb. Our
Posted in Uncategorized Tagged with: SP500
Wow, the SPX ends the April expiry in its zone Nb. Our comment for 19/04/24 So, here we are at
Posted in Uncategorized Tagged with: SP500
The Ratio levels dominated the FTSE100 last week Nb. Our comment on 15/04/24 Again, the last five trading days were
Posted in Uncategorized Tagged with: derivatives, FTSE
The SPX April expiry starts with a defining moment. Nb. Our comment for 19/03/24 Again, before we get onto April
Posted in Uncategorized
The FTSE April expiry is here and it could be a fun ride. Nb. Our comment on 18/03/24 Before we
Posted in Uncategorized Tagged with: derivatives, FTSE
Significant changes in the FTSE Ratio table and why there is such a huge disconnect between London and Europe Nb.
Posted in Uncategorized
The FTSE starts the mighty March expiry in an interesting situation. Nb. Our comment on 19/02/24 Well, the last week
Posted in Uncategorized Tagged with: derivatives, FTSE