How Does Delta Hedging Work?
Delta hedging is a risk management technique used to reduce or eliminate the directional risk of an option position. A trader buys or sells the underlying asset to offset the option's Delta, aiming for a "Delta-neutral" portfolio where the overall value is insensitive to small price changes.
Glossar
Underlying Asset
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
Framework ⎊ Delta hedging, within cryptocurrency derivatives, represents a dynamic risk management strategy designed to neutralize the directional exposure arising from options positions.
Risk Management
Exposure ⎊ Within cryptocurrency derivatives and options trading, exposure represents the aggregate risk arising from positions predicated on anticipated price movements.
Directional Risk
Exposure ⎊ Directional risk, within cryptocurrency derivatives and options trading, fundamentally represents the potential for financial loss stemming from adverse price movements.