How Is Delta Used for Hedging in Options Trading?
Delta hedging is a strategy used to reduce or eliminate the directional risk associated with price movements of the underlying asset. A trader can achieve a "Delta-neutral" position by taking an opposite position in the underlying asset proportional to the portfolio's net Delta.
For example, a portfolio with a Delta of +50 can be hedged by shorting 50 units of the underlying asset. This minimizes risk from small price changes.
