What Is “Delta Hedging” and How Is It Used with Options?
Delta hedging is an options strategy used to reduce or neutralize the directional risk of an option position. Delta measures the sensitivity of an option's price to a change in the underlying asset's price.
A hedger buys or sells the underlying asset (or futures contracts) in an amount determined by the option's delta to maintain a "delta-neutral" portfolio. This strategy protects the hedger from small price movements in the underlying asset.
Glossar
Price Movements
Momentum ⎊ Within cryptocurrency derivatives and options, momentum describes the rate of change in price, reflecting investor conviction and potential for sustained directional movement.
Directional Risk
Exposure ⎊ Directional risk, within cryptocurrency derivatives and options trading, fundamentally represents the potential for financial loss stemming from adverse price movements.
Delta Value
Measurement ⎊ Delta value is a first-order Greek measure quantifying the sensitivity of an option's price to changes in the underlying asset's price.
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.