How To Delta Hedge Your Options Portfolio

In this lesson, I want to talk to you about delta, and more specifically, how to delta hedge your portfolio. First of all, what is delta? What is this so called delta that we speak of? There's a couple different ways that we use delta to trade. At NavigationTrading, there's really two specific ways that we reference delta. The first of which, is delta as the probability of an option expiring in the money.

The second way we reference delta, is that it is the directional bias of a position or group of positions. Just think of delta as direction. If you're long delta, you want that stock to go up to benefit your position. If you're short or negative delta, you want that stock to go down to benefit your position. Let's take a look at some of the different positions and how the delta or direction of these positions is affected...

Watch our video to see the full details on how we reference delta in our portfolio!

Happy Trading!

The NavigationTrading Team

Connect with us!
Twitter @navtrading1

[nononnomonohjghdgdshrsrhsjgd]

Hi, the deltas here represents the value change in option contract towards 1 Dollar change in S&P. How do you convert these values into probability, which delta is, as well (apart from sensititvity measure)? I mean -67.71 is the delta of a the whole option contract and I am not sure if one divide to the
# shares in option, or interpret -67.71 as 67.71% (probability)? Thank you for the answer

[florianarnout]

Not the probability of expiring in the money at all ! Be careful !!

[SuperDangerousMouse]

What a waste of time !!! and btw Delta is NOT the probability of an option expiring ITM. It's simply the percent change in the option per a change in the underlying.