How Does the Need for Rebalancing Affect the Cost of Delta Hedging?

Rebalancing a Delta-hedged portfolio involves frequent buying and selling of the underlying asset or options to maintain the desired Delta. This process incurs transaction costs (commissions and slippage).

Higher Gamma necessitates more frequent rebalancing, leading to higher overall transaction costs. These costs can significantly erode the profits generated from the option's premium, making the strategy less profitable.