In Options, How Can Delta Hedging Be Used to Manage Price Risk Dynamically?

Delta hedging is a dynamic risk management strategy used to maintain a portfolio's delta (sensitivity to price changes) near zero, making the portfolio price-neutral. This is achieved by taking an opposite position in the underlying asset, proportional to the portfolio's delta.

As the underlying price changes, the delta of the options position changes, requiring the trader to continuously adjust the position in the underlying asset.