What is 'Delta Hedging'
Delta hedging is 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 basispoint change in price of the underlying is the delta and the relationship between the two movements is the hedge ratio.
BREAKING DOWN 'Delta Hedging'
For example, the price of a call option with a hedge ratio of 40 will rise 40% (of the stockprice 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 timevalue erosion  the greater the leverage. The opposite is true for options with a low hedge ratio.

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What are the limitations of using delta to hedge options?
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What industries typically use delta hedging techniques?
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What are common delta hedging strategies?
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How can you use delta to determine how to hedge options?
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Is there a better metric for hedging options than delta?
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Why does delta only range from 1 to 1?
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