Chapter 05 · Section 5.1

Delta Hedge

How many put option contracts would the hedger need to establish a delta hedge on his long position of 100 shares? Suppose that the Delta factor of the put is -0.5.

a) 0.5
b) 1
• c) 2
  Yes. With this hedge, a decrease in the value of the stock position would not be offset by an equal increase in the value of the options position. Continue

(Click here for help)