Definition ∞ Delta hedging is a risk management strategy employed in options trading to maintain a neutral position relative to the price of an underlying asset. It involves adjusting a portfolio’s holdings to offset changes in the option’s delta, which measures the sensitivity of the option’s price to movements in the underlying asset. The objective is to reduce or eliminate the directional risk associated with price fluctuations.
Context ∞ In financial markets, delta hedging is a standard practice among sophisticated traders and institutions managing derivative portfolios. Discussions often involve the practical challenges of executing delta-neutral strategies in volatile markets, particularly with the introduction of new derivative products. The effectiveness of delta hedging is frequently assessed in relation to market microstructure, transaction costs, and the accuracy of the delta calculations themselves.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
