I am able to identify and build an option portfolio with long/short call/put options across different strikes and expiries such that the gamma is positive and cost is negative. Upon inception I hedge the option portfolio so that delta is zero.
However, I am unable to identify at what threshold of delta% should I continuously hedge my portfolio as spot changes to keep it delta neutral. I set different thresholds such a 1%, 2%, 5% but not satisfied with this approach and was wondering if there is a more sound method.
Please not that transaction costs are not an issue. This is because the options are on BTC on Deribit exchange and since I start with a positive gamma (i.e. buy low sell high for delta hedge), I use passive LIMIT orders that have negative fees or rebates when filled.
For reference here is the github link