Delta Hedging
Offsetting an option position's directional risk by trading the underlying asset, and adjusting as delta…
In plain English
Offsetting an option position's directional risk by trading the underlying asset, and adjusting as delta changes.
An options dealer who sells you a call has risk if the price rises. Delta hedging means buying enough of the underlying to cancel out the option's delta, then constantly adjusting as delta shifts.
When lots of dealers hedge at once, their buying or selling can push the market itself, which is where ideas like the gamma squeeze come from.
Keep this word for good
Your free Private Swap Lounge saves the terms you’ve learned and quizzes you on them. Portal under construction. Expected delivery date is December 01, 2026.