Skip to main content
Learn

Why Is a Delta-Neutral Portfolio Not Perfectly Hedged against Large Price Moves?

Gamma risk causes Delta to change significantly during large moves, requiring costly re-hedging to maintain neutrality.
Greeks.Live05.11.25

Why Is a Delta-Neutral Portfolio Not Perfectly Hedged against Large Price Moves?

A Delta-neutral portfolio is only perfectly hedged against small, instantaneous price movements. It is vulnerable to large price movements because of Gamma risk.

Gamma measures the rate of change of Delta. A large move in the underlying crypto price will significantly change the portfolio's Delta, requiring immediate re-hedging to restore neutrality, which incurs transaction costs and potential slippage.

Why Does Gamma Increase Dramatically for Near-the-Money Options Close to Expiration?
Why Is High Gamma Detrimental to a Static Delta Hedge?
How Is Gamma Used in Conjunction with Delta for a Portfolio Hedge?
Why Must a Delta-Neutral Position Be Constantly Rebalanced (Delta-Hedging)?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.