The hedged rolling delta trade is identical to the rolling delta trade with one exception. Upon initialization of the trade, a position, further "out of the money" is initialized in the direction of the primary extension.
For instance, as the example mentioned in the description of the rolling delta trade, we buy (5) 115 Put contracts when stock XXX is trading at 125.00 to start the position. At this same time, we purchase (5) 145.00 (or 150's) call contracts of the same month expiry. This allows the calls to gain in value, thus covering the cost of the vertical rolling of the put contracts. The hedge is exited up completion of the compensating retracement along with the put contracts. Upon completion of the retracement, the calls may of lost some value compared to the entry, but it is a sacrifice for the greater gain. If the extension runs far enough, both sides of the position can be exited profitably (Thanks to Dave for assistance with this trade set-up). I used this hedge with a primary fade before, but did not apply it to the delta roll trade until not too long ago.
The newsletter will include the following when a hedged delta fade trade is exhibited:
Entry of both sides of the postion
Strike prices selected
estimated cost per roll
roll increments (and calculation of larger lot roll increments)
projected profit as the trade matures (also updated via email/text)
Stop loss level.
