# Explain the Concept of 'Delta Hedging' ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

---

## Explain the Concept of ‘Delta Hedging’.

Delta Hedging is an options strategy used to reduce or eliminate the directional risk associated with price movements of the underlying asset. It involves taking an opposite position in the underlying asset (or another derivative) to offset the Delta of the option position, aiming for a portfolio Delta of zero (Delta-neutral).

This requires frequent rebalancing as Delta changes.

- [How Can a Trader Construct a Vega-Neutral Portfolio?](https://learn.greeks.live/path/how-can-a-trader-construct-a-vega-neutral-portfolio/)

- [What Is the Next Level of Hedging beyond Delta and Gamma Neutrality?](https://learn.greeks.live/path/what-is-the-next-level-of-hedging-beyond-delta-and-gamma-neutrality/)

- [How Does Delta Hedging Specifically Mitigate a Market Maker’s Inventory Risk?](https://learn.greeks.live/path/how-does-delta-hedging-specifically-mitigate-a-market-makers-inventory-risk/)

- [Define “Delta Hedging” in Options Trading](https://learn.greeks.live/path/define-delta-hedging-in-options-trading/)

- [Define Hedging in the Context of Crypto Derivatives](https://learn.greeks.live/path/define-hedging-in-the-context-of-crypto-derivatives/)

- [How Does “Delta Hedging” Relate to the Liquidity Needs of an Options Portfolio?](https://learn.greeks.live/path/how-does-delta-hedging-relate-to-the-liquidity-needs-of-an-options-portfolio/)

- [How Can Institutional Traders Use Futures Contracts for ‘Basis Trading’ in Crypto?](https://learn.greeks.live/path/how-can-institutional-traders-use-futures-contracts-for-basis-trading-in-crypto/)

- [How Is a Delta-Neutral Position Constructed Using Bitcoin Futures and Options?](https://learn.greeks.live/path/how-is-a-delta-neutral-position-constructed-using-bitcoin-futures-and-options/)

## Glossar

### [Portfolio Delta](https://learn.greeks.live/area/portfolio-delta/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Exposure ⎊ Portfolio Delta, within cryptocurrency options and derivatives, quantifies the sensitivity of a portfolio’s value to a one-unit change in the underlying asset’s price, functioning as a crucial risk metric.

### [Underlying Asset](https://learn.greeks.live/area/underlying-asset/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Futures Pricing incorporates the cost of carry, which in crypto markets includes funding rates derived from perpetual swap markets and the time value associated with holding the spot asset.

### [Delta Hedging](https://learn.greeks.live/area/delta-hedging/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Framework ⎊ Delta hedging, within cryptocurrency derivatives, represents a dynamic risk management strategy designed to neutralize the directional exposure arising from options positions.

### [Market Maker](https://learn.greeks.live/area/market-maker/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Agency ⎊ A market maker in cryptocurrency derivatives functions as a principal, providing liquidity by simultaneously posting bid and ask prices for contracts, notably perpetual swaps and options.

### [Directional Risk](https://learn.greeks.live/area/directional-risk/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Exposure ⎊ Directional risk, within cryptocurrency derivatives and options trading, fundamentally represents the potential for financial loss stemming from adverse price movements.

### [Options Strategy](https://learn.greeks.live/area/options-strategy/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Framework ⎊ Options strategies within cryptocurrency derivatives represent a structured approach to managing risk and generating returns, leveraging the unique characteristics of digital assets and their associated options contracts.

## Discover More

### [What Is "Gamma Risk" and How Does It Relate to Delta Hedging during High Volatility?](https://learn.greeks.live/path/what-is-gamma-risk-and-how-does-it-relate-to-delta-hedging-during-high-volatility/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is "Gamma Risk" and How Does It Relate to Delta Hedging during High Volatility?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Volatility-Surface-Structure-Representing-Implied-Volatility-Skew-in-Decentralized-Derivatives-Markets.webp)

Exposure to rapid changes in Delta, forcing MMs to quickly adjust hedges, which accelerates price movement during volatility.

### [How Does 'Delta' Hedging Work for a Crypto Options Market Maker?](https://learn.greeks.live/path/how-does-delta-hedging-work-for-a-crypto-options-market-maker/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does 'Delta' Hedging Work for a Crypto Options Market Maker?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Hedging-Vector-Geometry-Illustrating-Multi-Legged-Option-Strategy-Implementation-in-Decentralized-Finance.webp)

Delta hedging involves calculating the options portfolio's net Delta and executing offsetting trades in the underlying asset to achieve a market-neutral, zero-Delta position.

### [How Does the Concept of "Delta" in Options Trading Measure the Derivative's Sensitivity to the Underlying Asset Price?](https://learn.greeks.live/path/how-does-the-concept-of-delta-in-options-trading-measure-the-derivatives-sensitivity-to-the-underlying-asset-price/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of "Delta" in Options Trading Measure the Derivative's Sensitivity to the Underlying Asset Price?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Depiction-of-Implied-Volatility-Measurement-Through-Financial-Derivative-Clock-Mechanisms.webp)

Delta measures the option's price sensitivity to the underlying asset's price movement, also approximating the ITM probability.

### [What Is "Delta Hedging" and How Is It Used with Options?](https://learn.greeks.live/path/what-is-delta-hedging-and-how-is-it-used-with-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is "Delta Hedging" and How Is It Used with Options?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalized-Geometric-Fin-Structure-Piercing-Digital-Asset-Datum-Through-Black-Void.webp)

Delta hedging uses the underlying asset's delta to neutralize directional price risk, creating a "delta-neutral" portfolio.

### [Explain the Concept of 'Tail Risk' in the Context of Customized Derivatives](https://learn.greeks.live/path/explain-the-concept-of-tail-risk-in-the-context-of-customized-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Concept of 'Tail Risk' in the Context of Customized Derivatives](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Entanglement-Probe-Vector-Penetrating-Composite-Structure-Signaling-Decentralized-Exchange-Futures.webp)

Tail risk is the exposure to extreme, low-probability market events, which is magnified and harder to hedge in customized derivatives.

### [What Is the Concept of Basis Risk in Hedging with Derivatives?](https://learn.greeks.live/path/what-is-the-concept-of-basis-risk-in-hedging-with-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Concept of Basis Risk in Hedging with Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Tungsten-Carbide-Ring-on-Hydroplaned-Metal-Surface-Illustrating-Impermanent-Liquidity-Pool-Volatility-Dynamics.webp)

Basis risk is the risk that the derivative price and the underlying asset price do not move in perfect correlation, leading to an imperfect hedge.

### [How Does the Concept of "Basis Risk" Relate to Derivative Hedging?](https://learn.greeks.live/path/how-does-the-concept-of-basis-risk-relate-to-derivative-hedging/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of "Basis Risk" Relate to Derivative Hedging?](https://learn.greeks.live/wp-content/uploads/2025/10/Teal-Haptic-Interface-Modeling-Advanced-Cryptocurrency-Options-Hedging-Mechanism-Execution-Gate.webp)

The risk that the derivative's price movement does not perfectly match the underlying asset's price, leading to an imperfect hedge.

### [How Does Delta Hedging Relate to the Rebalancing of a Short Option Position?](https://learn.greeks.live/path/how-does-delta-hedging-relate-to-the-rebalancing-of-a-short-option-position/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Delta Hedging Relate to the Rebalancing of a Short Option Position?](https://learn.greeks.live/wp-content/uploads/2025/10/Cryptocurrency-Volatility-Skew-Hedging-Mechanism-Depicting-Exotic-Option-Payoff-Structures.webp)

Delta hedging is adjusting the underlying asset position to keep delta near zero; short gamma forces costly, frequent adjustments.

### [In Options, How Can Delta Hedging Be Used to Manage Price Risk Dynamically?](https://learn.greeks.live/path/in-options-how-can-delta-hedging-be-used-to-manage-price-risk-dynamically/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![In Options, How Can Delta Hedging Be Used to Manage Price Risk Dynamically?](https://learn.greeks.live/wp-content/uploads/2025/10/Interlocking-Black-and-White-Curvilinear-Structures-Suggesting-Algorithmic-Liquidity-Pool-Mechanics.webp)

It is a dynamic strategy of adjusting the underlying asset position based on the portfolio's delta to maintain a price-neutral position.

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**Original URL:** https://learn.greeks.live/learn/explain-the-concept-of-delta-hedging/
