标题: Delta Question, I've always had trouble with this one [打印本页] 作者: hoangvu90 时间: 2011-7-13 17:05 标题: Delta Question, I've always had trouble with this one
(you have a long position that is delta hedged by selling calls)
As the option delta moves further away from zero (as opposed to moving closer to zero) the number options necessary to maintain the hedge
decreases, its a lot easier to just plug in number then conceptualizing it. The greater the delta the more the option changes with price, so less needed作者: yalo 时间: 2011-7-13 17:05
As delta moves further away from zero, what happens? It's getting closer to 1, right? (delta is always between 0 and 1 for calls remember)..
And what does delta tell you? It tells you how many shares you need per short call. So 1 / delta tells you how many calls you need per share.
So if delta is getting closer and closer to 1, then 1 / delta is also getting closer and closer to 1.
But remember for small delta, you have 1 / delta being large so the number of calls needs is decreasing.作者: Rasec 时间: 2011-7-13 17:05
#options needed for hedge = # stock shares/delta
if delta moves away from zero as in going from 0 to 1, the delta increases. 100 options necessary for 1000 shares and delta of 10. if delta increase to 15, then # options needed is 1000/15 which yields less than 100 options so i would guess decrease?作者: flyinggirl 时间: 2011-7-13 17:05
The answer is
because the delta of the put options is negative, as the option delta moves further away from zero, closer to -1, the option becomes more in the money and the number of options necessary to maintain the hedge will DECREASE作者: sameeragarwal 时间: 2011-7-13 17:05
