# Delta Hedging

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## Definition of 'Delta Hedging'

Delta hedging is a risk management strategy that seeks to offset the change in the value of an option position by taking an equal and opposite position in the underlying asset. This can be done by buying or selling the underlying asset, or by using a combination of options and other financial instruments.

Delta hedging is used to reduce the risk of an option position, but it does not eliminate all risk. The delta of an option is a measure of its sensitivity to changes in the price of the underlying asset. As the price of the underlying asset changes, the delta of the option will also change. This means that the delta hedge will need to be adjusted over time to keep the risk of the option position at a desired level.

Delta hedging is a complex strategy that can be difficult to implement. It is important to understand the risks involved before using delta hedging.

Here are some of the advantages of delta hedging:

* It can help to reduce the risk of an option position.

* It can be used to lock in a profit on an option position.

* It can be used to manage the risk of a portfolio of options.

Here are some of the disadvantages of delta hedging:

* It can be complex to implement.

* It can be expensive to implement.

* It does not eliminate all risk.

Delta hedging is a useful risk management strategy, but it is important to understand the risks involved before using it.

Delta hedging is used to reduce the risk of an option position, but it does not eliminate all risk. The delta of an option is a measure of its sensitivity to changes in the price of the underlying asset. As the price of the underlying asset changes, the delta of the option will also change. This means that the delta hedge will need to be adjusted over time to keep the risk of the option position at a desired level.

Delta hedging is a complex strategy that can be difficult to implement. It is important to understand the risks involved before using delta hedging.

Here are some of the advantages of delta hedging:

* It can help to reduce the risk of an option position.

* It can be used to lock in a profit on an option position.

* It can be used to manage the risk of a portfolio of options.

Here are some of the disadvantages of delta hedging:

* It can be complex to implement.

* It can be expensive to implement.

* It does not eliminate all risk.

Delta hedging is a useful risk management strategy, but it is important to understand the risks involved before using it.

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Copyright © 2004-2023, MyPivots. All rights reserved.