Equity Derivatives Trader Question
How do equity derivatives traders hedge their client's positions, and i guess more generally what does an equity derivatives trader do (besides the obvious of trading equity derivatives)
Go into the market, go OTC against another client to net out some risk. The stuff they don't hedge they warehouse.
HF A sells me 10K ATM NVDA calls, I sell 5K of them to another desk, delta hedge 2K of them, and sell another bit of the OTM's instead of netting the ATMs because I like the risk profile.
The main thing I'm watching position-wise is how much theta I pay a day, how much Vega exposure I have, and how quickly the position's delta moves when a 1% move happens i.e., my gamma risk.
I'm on a different product, but this is our thought process.
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