Delta Hedging Explained: Options Trading Strategies

Unlock the secrets of delta hedging with our comprehensive guide on options trading strategies. Discover how delta impacts option Greeks, and learn the difference between positive and negative delta to optimize your hedging techniques. Explore the dynamics of delta changes over time and with stock price fluctuations, and compare static versus dynamic hedging approaches. Gain practical insights with a detailed example of dynamic delta hedging, perfect for both novice and experienced traders looking to achieve delta neutral portfolios.

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Chapters:
0:00 - Intro to Delta in Option Greeks
0:57 - Hedging: Positive Vs Negative Delta
2:22 - Option Price Change Based on Delta
3:03 - What is Delta Hedging?
3:57 - Delta Neutral Portfolios Explained
5:29 - Delta Changes Over Time
7:43 - Delta Changes With Stock Price
9:01 - Static Hedging Vs Dynamic Hedging
10:22 - Dynamic Delta Hedging Example

*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

[RyanOConnellCFA]

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[pizzaandmeth]

Hey Ryan, been a while....on my final run through the syllabus and realised my knowledge of Delta had reaaaallly Slipped....this is just what I needed haha..beautifuly put....about 2 weeks to go now for Level 3.

[millenialmusings]

Can you explain what's the point of delta hedging in the first place? Why not take a more passive and directional view like most retail traders do and just go long on equities over the long term? I'm just curious as someone newly interested in finance and derivatives

[lyconthrop]

Hey Ryan amazing explanation. just a quick question..in your example of dynamic hedging, as delta changes across different time periods (i.e week 1 & 2 where stock price fell) and you sold 6.4k + 5.8k stocks at a lower price. These are realized losses that the investor has to absorb right? The investor would NOT make back these losses through the delta hedge right?

[lovarandriamampandry]

Hello Ryan thank you very much for your contributions! I am about to work as a credit risk analyst for an investment banking. According to you, this job experience could be valuable in the future for a job as a fixed income trader? Cheers from France

[aion]

Sir one question: delta 0.99 call sell $500 and 0.99 put sell $900 . If the market goes up 5% then price will change as per LTP of $500 5% and $900 5% ?

[pizzaandmeth]

This should be good for L3 derivatives..Thanks Ryan

[InstitutoMusah]

No perderias dinero cada vez que el precio baja? Basicamente comoras acciones si sube y vendes si baja (lo contrsrio a la logica). La prima recibida por el shot call comoensa ests cobertura?