Earlier today, I paid 911 for a Dow March 12100 straddle, in $20/point (just over $18,000 premium). My plan here is to do some crude delta hedging, selling $2/point of Dow March futures every 100 points up. At the time I bought the straddle, I sold $2/point of the Dow (about $25,000 worth) at 12270, and set limits to open positions every 100 points away from the strike. So at 12300, I sold another $2/point, at 12400 I'll sell ANOTHER $2/point, etc etc, until if it hits 13100 I'll sell my final delta and I'll be flat on the way up. If the market blew out of the 1000 point range either side of 12100 I'm trying to trade, I'll lose about $9,000. However, I'm hoping I can catch some swings, so in this example, every 100 points it drops, I'll cover that sale. So my first and second sales will be bought back at 12200 and 12100 respectively, then on the way down, I have buy limits set every 100 points down for 1000 points. We'll see how it goes.
Hope that's clear. I'm not going to add it to the spreadsheet at the moment, as I'll be forever updating it as limits get hit. I'll have to think of the best way to do this.
Here's hoping it just keeps flying around for a couple of months between 11000 and 13000...