Delta Hedging

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Dictionary Says

Definition of 'Delta Hedging'

An options strategy that aims to reduce (hedge) the risk associated with price movements in the underlying asset by offsetting long and short positions. For example, a long call position may be delta hedged by shorting the underlying stock. This strategy is based on the change in premium (price of option) caused by a change in the price of the underlying security. The change in premium for each basis-point change in price of the underlying is the delta and the relationship between the two movements is the hedge ratio.
Investopedia Says

Investopedia explains 'Delta Hedging'

For example, the price of a call option with a hedge ratio of 40 will rise 40% (of the stock-price move) if the price of the underlying stock increases. Typically, options with high hedge ratios are usually more profitable to buy rather than write since the greater the percentage movement - relative to the underlying's price and the corresponding little time-value erosion - the greater the leverage. The opposite is true for options with a low hedge ratio.

Directory (Option Strategy)

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    Alligator Spread

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  24. Covered Call

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  27. Credit Spread

  28. Death Put

  29. Debit Spread

  30. Delta Hedging

  31. Delta Neutral

  32. Delta Spread

  33. Diagonal Spread

  34. Dividend Arbitrage

  35. Double One-Touch Option

  36. Fence (Options)

  37. Fiduciary Call

  38. Fixed Dollar Value Collar

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  42. Form 6781: Gains And Losses From Section ...

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  57. Long-Term Equity Anticipation Securities ...

  58. Married Put

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  88. Seagull Option

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  90. Series 4

  91. Short Leg

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  93. Straddle

  94. Strangle

  95. Swing Option

  96. Synthetic Dividend

  97. Variable Ratio Write

  98. VIX Option

  99. Writing An Option

  100. Zero Cost Collar

  101. Zomma

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