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# Delta Hedging | Options Strategies

## Understanding delta in options →

Hey there!

Today we’ll be talking about **deltas** **in options **and how to use them effectively for trading strategies.

The delta of an option is the **sensitivity of the price of an option contract (premium) to the price of the underlying**. If a stock’s price changes by 5% while its call option’s price changes by only 4%, the option’s delta would be 0.8 (4/5).

The delta of a call option increases as it moves from** out-of-the-money **to **in-the-money**, while it’s the opposite for puts.

Using multiple positive-delta and negative-delta positions to build a portfolio that has 0 delta overall is known as a **delta-neutral strategy. **You would desire such a portfolio for **hedging purposes**.

Say you have invested in a stock for the long term, but are worried about that stock declining in the short term. You can choose to delta-hedge that position by buying the right set of put options, which will keep you protected from any adverse movement in the short term.

A delta-neutral portfolio does not expose you to changes in the underlying instrument, while **still allowing you to profit off the implied volatility or time decay** of its options. We talked about implied volatility yesterday, remember?

## 🔼 Learn delta-hedging strategies in options

Master delta-neutral and delta-out strategies with our **Delta Hedging Course by Mr. Chinta****n Doshi**, an active trader for 14+ years and the founder of Vardhmaan Finserv.

Use **NL30 **at checkout for an additional **30% discount**👇️

**None of the above stock ideas are intended as recommendations. Please consult a registered advisor before buying/selling.**

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