Forums > Pricing & Modelling > P&L of a delta hedged Straddle

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 aschon Total Posts: 164 Joined: Jun 2008
 Posted: 2008-07-04 17:40 "in a bs world you don't need to gamma hedge since continuous delta hedge is enough to remove all the risk relative to stock"Absolut plausible. I should have known.Thanks for your help. In practice, this works, but how about in theory?
 aschon Total Posts: 164 Joined: Jun 2008
 Posted: 2008-07-06 11:12 Just to salve my conscience.The P&L of a straddle differs in the scale factor from that one of a delta hedged option. Right?So you got 1 instead of 1/2 in front of your P&L. In practice, this works, but how about in theory?
 Baltazar Total Posts: 1765 Joined: Jul 2004
 Posted: 2008-07-07 08:43 of course since a straddle is two options, you should compare it with two delta hedged options not with one. Qui fait le malin tombe dans le ravin
 aschon Total Posts: 164 Joined: Jun 2008