What Is the Difference between Dynamic and Static Hedging?

Dynamic hedging involves continuously or frequently adjusting the hedge ratio (the amount of the underlying asset held) as the Delta of the option changes. It is necessary for options with high Gamma.

Static hedging involves setting up a hedge once, typically with a combination of options, and holding it until expiration without adjustment. Static hedging is suitable for strategies where the overall Delta is stable, such as a butterfly spread.